October producer prices were weaker than expected across the board, suggesting the easing in producer prices inflation indicated by recent survey data might be starting to show in official estimates. Input prices fell sharply in October by 0.8% m/m (consensus: -0.3%, BarCap: 0.0%) after increasing by 1.8% the previous month.

The sharp decrease reflected price falls in crude oil, imported metals and home produced foods. Furthermore, the price of imported materials (including oil) fell by 1.2%, a sign that import price pressures could start to ease for businesses. October output prices were flat on the month (consensus: 0.1%, BarCap: 0.2%, last: 0.3%) as price increases in food products, clothing and textiles were offset by falls in the prices of chemicals, computers and electrical products. Core output prices fell by 0.1% m/m (consensus: 0.1%, BarCap: 0.2%) after increasing by 0.3% in September.
 
On an annual basis, price inflation remained elevated, however. Input prices rose by 14.1%, output prices were up by 5.7% and core output prices were up 3.4%. Although the gap between output and input price inflation narrowed somewhat this month, the data continue to suggest that producers are not passing the full extent of their cost pressures to their customers. If the weakening trend continues, it may provide some relief for consumer goods inflation (see chart 1).
 
The October data indicate some moderation in input cost pressures, especially from imported materials, and survey data suggest that further weakening may be in store (see chart 2). At the same time, the difficult economic conditions are likely to keep output prices in check and help drive a marked fall in consumer price inflation during the course of next year.
 

source: BarCap