UK Producer Prices - Economic Data Preview

Turning to the UK, May’s Producer Price Index report is expected to reveal that the annual pace of wholesale inflation shrank -0.4%, the first time in nearly seven years. The reading implies downward pressure on consumer prices (the headline inflation gauge) in the months ahead as lower production costs are passed on via cheaper finished products. Although inflation now stands at 2.3%, a reading comfortably close to the Bank of England’s 2% target level, economists expect price growth to slip below 1% through the second half of this year. Median estimates from the bank now suggest economic growth will average 0.02% over 2010, an assumption that yields forecasts of a return to inflation above 1% in the first quarter of next year.