The annual gain in prices of goods leaving British factories slipped more than expected in May, figures showed today.
The Office for National Statistics (ONS) said output price inflation slipped to 2.7 per cent in May from 3.3 per cent in April and against expectations of 3.0 per cent.
Prices fell a non-seasonally adjusted 0.2 per cent on the month after a 0.7 per cent rise and confounding analysts' expectations of a 0.2 per cent gain.
Core factory gate inflation - which excludes food, beverages, tobacco and petroleum products - held steady at 2.6 per cent. Still, the figures suggested nascent pricing power in Britain's struggling manufacturing sector may be receding and supported expectations that interest rates have peaked at 4.75 per cent and are probably headed lower later this year.
The overall drop in output prices came as furniture product prices fell 0.5 per cent on the month.
Recovered secondary raw material product prices, which mainly include scrap steel prices, fell by 10.0 per cent on the month. The ONS also said input prices unexpectedly rose 0.3 per cent in May after a 0.2 per cent gain in April and compared with forecasts of a 0.5 per cent fall.
The annual gain fell to 7.8 per cent from a revised 10.2 per cent.