By Marcus Leach

Official data from the Office for National Statistics has shown that UK producer prices rose 0.6% in March from February.

The figures, released today (Friday), are in large down to the increase in cost of petrol, tobacco and alcohol.

The key points:

- In the year to March 2012 the output price index for home sales of manufactured products rose 3.6 per cent, compared with a rise of 4.1 per cent last month. The last time the annual rate was lower was in January 2010, when the index rose 3.5 per cent.

- Between February and March the output index for home sales of manufactured products rose 0.6 per cent.

- In the year to March 2012 the output price index excluding food, beverages, tobacco & petroleum rose 2.5 per cent, compared with a rise of 3.0 per cent last month.

“These figures show a welcome decline in the pace of producer price inflation, which will help to reduce the current squeeze on businesses and consumers," David Kern, Chief Economist at the British Chambers of Commerce (BCC), said.

"However, the fall was not as sharp as many analysts were expecting. On this basis, we expect the downward trend in inflation to continue throughout the year, but at a slower pace than the MPC predicted. Increases in oil and food prices have reinforced concerns about the outlook for inflation, and although there are signs that these pressures are easing, the situation will remain uncertain for some time.

“If the MPC is faced with a slower fall in inflation, it would reinforce the case against further increases in QE. We believe that additional increases are unnecessary, but existing QE should be made more effective by helping to increase lending to credit-worthy businesses.”

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