Prices at factory gates in the euro zone rose as fast as expected in May despite diminished pressure from energy costs, data showed today.
Industrial producer prices in the 12 countries using the euro rose 0.3 per cent month-on-month for an annual gain of 6.0 per cent, the steepest yearly increase in nearly six years, European Union statistics agency Eurostat said.
The figures, which matched analysts' expectations, showed prices in the industry were mainly boosted by unfinished goods and raw materials, with oil exerting no upward pressure in monthly terms.
"The producer price inflation data will reinforce the ECB's (European Central Bank) concerns that high energy prices are now increasingly filtering through the supply chain," said Howard Archer, chief European economist at Global Insight. Prices excluding energy increased by 0.4 per cent in May from the previous month and by 2.6 per cent from a year earlier.
Prices in the energy sector, the main booster of factory gate prices in past months, stayed flat month-on-month but were up 18.6 per cent year-on-year. Intermediate goods, or unfinished products, raw materials and other components, rose 0.9 per cent from April and 4.5 per cent from the previous year. Durable consumer goods rose 0.2 per cent month-on-month and non-durable consumer goods by 0.1 per cent.
Unless absorbed by intermediaries, rises in producer prices are eventually passed on to the consumer. That in turn boosts headline inflation, which the ECB wants to keep below but close to 2.0 per cent.
Since December the ECB has increased its main rate by a quarter percentage point every three months, taking it to 2.75 per cent in June. But its hawkish talk has raised the possibility that the next rise might be bigger, or sooner than predicted.