British factory prices in first drop since 2008: official

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The price of goods leaving factories in Britain fell in June for the first time since late 2008, official data showed on Friday, while the surprise figures eased fears about high inflation.

Producer prices slid by 0.3 percent last month, compared with the level in May, the Office for National Statistics (ONS) said in a statement.

That compared with forecasts of 0.1-percent increase, according to analysts polled by Dow Jones Newswires.

Economists said that June's official data indicated that inflation was set to fall in the coming months, which in turn would prevent the Bank of England from rushing to raise its key interest rate from a record-low level of 0.50 percent.

"The index fell 0.3 percent between May and June, mainly reflecting price falls in petroleum products, other manufactured products and food products," the ONS said.

However, prices soared by 5.1 percent in June compared with the same month in 2009. That was far higher than expectations for a 4.0-percent gain, but marked a slowdown from the 5.5-percent surge in May 2010.

Capital Economics analyst Vicky Redwood said that the data signalled that inflation was easing.

"June's producer prices figures provide further evidence of an easing in price pressures at the start of the inflation pipeline," said Redwood.

"We still think that CPI (consumer price index) inflation is set to fall sharply as the temporary factors that have pushed it up start to fade."

CPI 12-month inflation softened to 3.4 percent in May from a 17-month peak of 3.7 percent in April, recent official data showed -- still far above the Bank of England's 2.0-percent target level. The June inflation data is due to be published on Tuesday.

© 2010 AFP

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