§ Mr. Tierneyasked the Secretary of State for Prices and Consumer Protection why manufacturers' output prices are still rising when input prices have fallen in each of the past four months.
§ Mr. MaclennanIndustry's input prices and output prices often move in different directions for short periods. During the second half of 1975, for example, input prices were accelerating, rising by 14 per cent. in that period, while output prices were decelerating and rose by only 6½ per cent. There are two reasons for this. First, raw materials and fuels are only part of the costs incurred by manufacturing industry. Other costs include labour, rates, rents, depreciation and interest charges. Secondly, there are time lags between the increases in input costs and their subsequent reflection in output prices. For example, a study published by the Price Commission—"Raw Materials Movements and Retail Prices, May 1976"—concluded that lags between changes in commodity prices and their effect on retail prices varied from a negligible interval to 18 months. Nevertheless, the effect of stable input prices coupled with continued wage restraint is now being seen in the output index; the output index rose in November by ¼ per cent., the lowest monthly increase since April 1973.