Materials prices ease inflation fears

Fears of a longer-lasting spike in inflation eased yesterday after it emerged that growth in factory gate prices slowed more than expected last month.

Output prices rose 4.7 per cent in the year to August, compared with 5 per cent in July and the lowest level posted by the Office for National Statistics since February.

The decline will be welcomed at the Bank of England where policymakers have seen consumer price inflation remain above their 2 per cent medium-term target.

The cost of materials and fuels purchased by the manufacturing industry also fell in August.

Jonathan Loynes, chief European economist at Capital Economics, said the figures offered tentative evidence that cost pressures at the start of the inflation pipeline were beginning to ease.