UK Oct factory costs fall sharply as oil prices dive

British factory costs fell at a record 5.6 percent in October as oil prices fell by nearly a fifth, official statistics showed on Monday, in a sign that inflationary pressures are rapidly coming off the boil.

The Office for National Statistics also said factory output prices fell by 1.0 percent last month, the fastest since comparable records started in 1986 and taking the annual rate of increase down to 6.8 percent from 8.5 percent in September.

Annual input price inflation nearly halved to 13.8 percent from 24.0 percent as oil, fuel and metal prices continued to come down sharply from peaks reached earlier in the year.

The figures are likely to boost expectations that headline inflation, currently running at 5.2 percent, will fall sharply in the coming months and could even slip below the Bank of England's two percent target.

Acknowledging the substantial downside risks to inflation, the central bank slashed interest rates by 1.5 percentage points last week to take borrowing costs to just 3 percent — the lowest level in more than half a century.

The cost of crude oil, one of the principal drivers behind the spike in inflation all around the world, fell by 19.5 percent in October alone — the sharpest monthly drop since December 2000.

But that still left oil prices 9.7 percent up on a year ago.

Imported metal prices fell 5.1 percent on the month in October, the biggest fall since records began in 1991.