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Producer prices index falls in August

In a welcome move for the UK government it was today revealed that the producer prices index fell from an annual growth rate of 5% in July to 4.7% in August. This is the lowest level for the producer prices index in six months and would appear to indicate that competition for customers is increasing and pressures on base costs are reducing.

While a reduction of 0.3% between July and August would not necessarily be the kind of figure which would normally grab the headlines, it is a relief to see the recent squeeze on producer prices falling back. This should take pressure off the UK economy and reduce overall inflation which has threatened to pull away and cause major problems for the UK economy in the short to medium term. That's not to say that inflation is dead but the very fact that the pressures which have been forcing the rate higher of late are beginning to recede.

This should mean that UK base rates are likely to remain at 0.5% for some time to come because there is no need to increase rates to offset any potential threat of inflation at this point in time. One last thing for the MPC to worry about!

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