U.K. PPI came in lower than expected in October, with factory gate prices down 1.0% on the month, a far greater fall than our survey median estimate for a 0.4% drop, as well as our own below-median estimate for 0.7%. This pushed the annual rate down to 6.8% y/y from 8.5% in September and compared to a consensus estimate for 7.4%. Meanwhile, core output PPI reached 4.9% y/y, versus 5.5% in September (revised from 5.4%) and compared to a market median estimate for 5.0%. Input prices also fell more than expected, down a whopping 5.6% on the month (median -2.0%) and reaching 13.8% y/y, it's lowest annual rate since December last year and compared to our survey median for 18.7%. Overall, data highlights that inflationary pressure is now easing, both on the back of lower oil prices but possibly also due to manufacturers squeezing their margins to meet lower demand. Data hence supports the outlook for further aggressive BoE rate cuts.
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