British producer prices and costs fell in November as oil and petroleum product prices declined sharply, official data showed on Monday, in a further sign that inflationary pressures are cooling.
However, the costs of some imported materials rose, suggesting the weaker pound may be having an impact.
The Office for National Statistics said output prices fell 0.7 percent on the month in November, in line with analysts' forecasts after October's record 1.0 percent drop.
That took the annual rate of output price inflation down to 5.1 percent last month from 6.7 percent in October, the lowest since December 2007.
The ONS said the fall in output prices was driven by a sharp fall in petroleum products, which fell by a record 8.3 percent.
Core output prices, which exclude food, tobacco, beverages and petroleum industries, unexpectedly rose 0.2 percent on the month partly driven by higher transport costs.
The figures are likely to reinforce the Bank of England's view that headline consumer price inflation will fall sharply in the coming months, with markets expecting further interest rates to come as Britain slides into recession.
"The further fall in UK producer prices in November provides more evidence that deflation is now becoming the greatest policy concern," said Paul Dales, an economist at Capital Economics.
"These numbers support our view that the Monetary Policy Committee needs to cut interest rates even further to stave off the threat of deflation."
Input prices fell 3.3 percent on the month, slightly more than the 3.0 percent fall predicted by analysts. The annual rate of input price inflation eased to 7.5 percent from 15.4 percent, the lowest since September 2007.
The ONS said a large fall in crude oil prices drove input prices lower in November, but that was partly offset by a rise in imported parts and equipment costs.
Parts and equipment prices were 16.5 percent higher on a year earlier, the highest rate since records began in 1999.
That may reflect the sharp fall in sterling against the currencies of its major trading partners this year.
Imported food material prices also rose, up 1.3 percent on the month for a 25.3 percent annual rise. That was in contrast to home produced food materials which fell 1.4 percent on the month and are up just 5.1 percent over the year.
"There some signs of higher cost pressures perhaps coming through via sterling's depreciation," said Philip Shaw, an economist at Investec. "Overall, this probably doesn't derail the disinflationary story."
