The UK's Producer Price Index (PPI) for inputs recorded a slight uptick in its annual deflation rate, moving to -2.7% for the year ending February 2024, a minor increase from the revised -2.8% observed in January, the Office for National Statistics (ONS) reported. This marks the ninth consecutive month of year-over-year contraction in input prices, signaling persistent deflationary pressures within the manufacturing sector.
The monthly input price index experienced a deeper deflation of -0.4% in February, a deceleration from the -0.1% recorded in January, suggesting a continued easing in the cost of materials and fuels used by manufacturers.
Conversely, the output (factory gate) PPI, which tracks the price changes of goods sold by manufacturers, showed signs of stabilization. The annual output inflation rate edged up to 0.4% in February from a revised -0.3% in January, reaching its highest level since June 2023. This modest recovery reflects a delicate balance in producer pricing power amid fluctuating market conditions.
Month-over-month, output prices increased by 0.3% in February, a rebound from the stagnant growth observed in January, indicating a gradual return to inflationary trends at the production stage.
Despite these monthly fluctuations, the ONS notes that the index levels for both input and output prices have remained broadly stable since mid-2022. The nuanced movements over the past nine months have contributed to a decline in the annual inflation rate for producer input prices, even as index levels persist at elevated standings.
The ONS has attributed these shifts to base effects, a phenomenon where the comparison to high index levels from the previous year leads to subdued annual inflation rates.
