Slower growth in energy costs helped curb annual price rises at factory gates in the euro zone in February, data from the European Union's statistics office showed today.
Eurostat said industrial producer prices (PPI) grew by 0.3 per cent month-on-month and 2.9 per cent year-on-year. Economists had expected the same monthly gain and a 2.8 per cent annual increase.
Producer prices are an early indication of inflationary pressure because their increases, unless absorbed by retailers via lower margins, eventually translate into higher costs for consumers.
The European Central Bank (ECB) wants to keep annual inflation just below 2 per cent. Even though consumer prices have been in line with that target since September 2006, markets expect the ECB to raise interest rates at least once more this year, to 4.0 per cent in June from the current 3.75 per cent.
The bank wants to stem medium-term inflationary pressures from fast credit growth and a tightening labour market as unemployment in the 13 countries using the euro fell to a record low of 7.3 per cent in February.
Durable consumer goods prices, a PPI component with a clear link to prices in stores, rose 0.4 per cent month-on-month and 2.0 per cent year-on-year, data showed.
Eurostat said that without the construction and energy components, or what economists call core producer price inflation, the index rose 0.3 per cent month-on-month and 3.4 per cent year-on-year.
But in annual terms energy was the biggest moderating factor, with prices up only 1 per cent, while intermediate goods prices rose 5.9 per cent.