UK factory gate inflation slows to near 18-mth low

British factory gate inflation slowed to its weakest in nearly 1-1/2 years in February, as firms came under pressure to keep down prices, and input price inflation eased, official data showed on Friday.

Producer price inflation fell to 3.1 percent last month, the lowest annual rate since September 2007. The ONS said the fall was largely due to a drop in prices for petroleum products.

Core output price inflation, which excludes food and fuel, slowed to an annual 3.7 percent in February from 4.0 percent, the weakest since March 2008.

"We strongly suspect that manufacturers will increasingly have to cut prices to compete in such a depressed environment," said Howard Archer, economist at IHS Global Insight.

The data also showed that annual input price inflation eased to 0.5 percent in February, the weakest rate since August 2007. The ONS said a 37.8 percent drop in crude oil prices over the last year was the main reason for the slowdown.

However, oil prices rose sharply in February itself, taking input prices up 0.6 percent on the month. The ONS said the weak pound exacerbated that effect.

Separately, the ONS published data on construction output, showing the total volume of output fell 7 percent in the three months to December 2008 compared with the previous quarter.