Manufacturers hit by soaring costs and tight price constraints were given a much-needed boost yesterday as figures showed the price of raw materials fell at the sharpest rate for nearly two years last month.
The Office for National Statistics said input costs for factories slipped 1.2 per cent in August - the biggest decline since December 2004 when costs dipped by 2.3 per cent.
The ONS said it reflected a drop in the price of crude oil, which eased 2.8 per cent between July and August to about $65 a barrel.
It led analysts to suggest that weakening cost pressures could help keep a lid on inflation and encourage the Bank of England's Monetary Policy Committee to hold interest rates for the rest of the year after the shock rise last month.
The falling cost of raw materials came as factories maintained the price of products they produced in August.
Economist Allan Monks, of JP Morgan Chase Bank, said: "Overall, the message coming from the report is that pricing pressures in the manufacturing sector looked to have eased over July and August.
"That is exactly the kind of news the MPC would need to see if it is to leave rates on hold in November."
Ross Walker, of the Royal Bank of Scotland, said the figures would ease some concerns over rising inflation.
"Although there is no direct or immediate link between producer and consumer price inflation, this data provides some reassurance that pipeline price pressures remain under control and, at the margin, alleviate some of the pressure on the MPC to tighten monetary policy," he said.
The overall price of goods produced in factories last month did not change following a 0.3 per cent rise in July.
The flat output rate came as increasing prices for electrical goods and food were offset by an eight per cent fall in scrap metal prices.
There was a 1.8 per cent rise in the price of coffee and tea, which was the biggest monthly increase since June 2005.
The rise in coffee prices was due to market concerns over short-term supply problems of the key robusta bean, which is farmed in Vietnam, after low rainfall affected the crop.
HSBC economist John Butler said: "The latest producer price data provided some evidence that inflationary pressure in the earliest part of the supply chain has peaked."