| Actual | Previous | Revised | |
| Output - M/M | 0.5% | 1.4% | 1.5% |
| Output - Y/Y | 4.0% | 4.0% | 4.1% |
| Input - M/M | 0.2% | 2.4% | 2.6% |
| Input - Y/Y | 8.7% | 7.7% | 7.9% |
Highlights
The UK's producer price data for May 2026 indicate that cost pressures within the production pipeline remain elevated, even as firms face increasing constraints in passing these costs fully on to consumers. Producer input prices accelerated to 8.7 percent year-over-year, up from 7.9 percent in April, signalling a renewed intensification of upstream inflationary pressures. The sharp rise in the import price index, from 8.8 percent to 10.1 percent, further suggests that imported inflation remains a significant challenge, likely reflecting higher global commodity costs and exchange rate effects.
Energy-related products continue to be the dominant driver of inflationary pressures. Crude oil contributed most strongly to rising input costs, while refined petroleum products exerted the largest upward influence on factory gate prices. This highlights the continued vulnerability of UK manufacturers to developments in global energy markets.
Despite rising input costs, producer output price inflation eased marginally from 4.1 percent to 4.0 percent, indicating that manufacturers may be absorbing a portion of higher production expenses rather than transferring them entirely to customers. On a monthly basis, output prices rose by 0.5 percent, outpacing the 0.2 percent increase in input prices, largely driven by higher prices for chemicals and manufactured goods linked to increased plastic costs. In summary, the latest data suggest that inflationary pressures remain entrenched within supply chains, posing ongoing risks to business profitability and future consumer price inflation.
Definition
The Producer Price Index (PPI) measures the prices of goods bought and sold by manufacturers. The input price index measure the prices of materials and fuels purchased by manufacturers for processing. These are not limited to just those materials used in the final product, but also include what is required by the company in its normal day-to-day running. The output price index captures prices charged by manufacturers as they pass through the factory gate and excludes any VAT or similar deductible tax. Both measures may be seen as leading indicators of consumer price index (CPI) inflation although the short-term correlation is only very weak.
Description
The PPI measures prices at the producer level before they are passed along to consumers. Since the producer price index measures prices of consumer goods and capital equipment, a portion of the inflation at the producer level gets passed through to the consumer price index (CPI). By tracking price pressures in the pipeline, investors can anticipate inflationary consequences in coming months. A producer's price is the amount received by a producer from the purchaser of a unit of goods or services produced as output less any value added tax (VAT) or similar deductible tax, invoiced to the purchaser. It excludes any transportation charges invoiced separately by the producer.
The PPI provides a key measure of inflation alongside the consumer price indexes and GDP deflators. The output price indexes measure change in manufacturer' goods prices produced and often are referred to as factory gate prices. Input prices are not limited to just those materials used in the final product, but also include what is required by the company in its normal day-to-day operations.
The PPI is considered a precursor of both consumer price inflation and profits. If the prices paid to manufacturers increase, businesses are faced with either charging higher prices or taking a cut in profits. The ability to pass along price increases depends on the strength and competitiveness of the marketplace.
The bond market rallies when the PPI decreases or posts only small increases, but bond prices fall when the PPI posts larger-than-expected gains. The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.