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By Matt Falloon and David Milliken
LONDON, Dec 8 (Reuters) - Cheaper oil drove British factory gate prices and producers' costs lower in November, official data showed on Monday, as inflationary pressures subside swiftly in the wake of the global economic downturn.
There were signs that the weaker pound is pushing up the cost of some imported materials, but most analysts said this was unlikely to have any lasting impact.
The Office for National Statistics said output prices fell 0.7 percent on the month in November, in line with analysts' forecasts after October's record 1.0 percent drop.
That took the annual rate of output price inflation down to 5.1 percent last month from 6.7 percent in October, the lowest since December 2007 and half the spike seen in July.
Input prices fell 3.3 percent, bringing the annual rate of inflation down to 7.5 percent -- the lowest since September 2007 and a less than a third of the rates seen just a few months ago when inflation was still a worry for most policymakers.
"The further fall in producer prices in November provides more evidence that deflation is now becoming the greatest policy concern, and suggests that the Monetary Policy Committee will cut interest rates further in the New Year," said Paul Dales, an economist at Capital Economics.
The Bank of England cut interest rates by 1 percentage point to 2 percent last week -- the lowest since 1951 -- as fears grow of a prolonged and painful recession.
Consumer price inflation has fallen sharply from a peak of 5.2 percent in September and could head below 1 percent next year and markets expect interest rates to continue to fall.
PETROL AND OIL DOWN
The ONS said the fall in output prices was driven by a sharp fall in petroleum products, which fell by a record 8.3 percent.
A large fall in crude oil prices -- around $20 a barrel -- drove input prices lower in November, but that was partly offset by a rise in imported parts and equipment costs.
Parts and equipment prices were 16.5 percent higher on a year earlier, the highest rate since records began in 1999.
That may reflect the sharp fall in sterling against the currencies of its major trading partners this year.
Imported food material prices also rose, up 1.3 percent on the month for a 25.3 percent annual rise. That was in contrast to home produced food materials which fell 1.4 percent on the month and are up just 5.1 percent over the year.
"There some signs of higher cost pressures perhaps coming through via sterling's depreciation," said Philip Shaw, an economist at Investec. "Overall, this probably doesn't derail the disinflationary story."
Core output prices, which exclude food, tobacco, beverages and petroleum industries, unexpectedly rose 0.2 percent on the month partly driven by higher transport costs. (Editing by Mike Peacock/Victoria Main)