German annual producer price inflation slowed in June for the first time in eight months, but was still higher than expected as rising energy costs continued to stoke inflationary fears within the euro zone.
Boosted by dearer oil, prices rose by 0.3 per cent from the previous month and by 6.1 per cent year-on-year, the Federal Statistics Office said today.
In May, German producer prices advanced 0.1 per cent on the month and by 6.2 per cent on the year, which was the highest annual inflation rate in nearly 24 years.
"As in the previous months, increases in the price of energy and non-ferrous metals in particular were responsible for the high annual rate," the Office said in a statement.
SEB economist Klaus Schruefer said that the slowdown in the annual rate, which was the first since October 2005, was probably the result of base effects. "All in all, upwards pressure on producer prices will likely continue so that there are still inflationary risks," he said.
"That's one of the reasons we expect the European Central Bank to raise its main lending rate by 25 basis points on August 3 to 3.0 percent," he added "Their policy is also being dictated by signs of stronger economic growth within the euro zone."
A breakdown of the Office's data showed that on the month, the price of mineral oil products rose by 0.6 per cent, while the cost of non-ferrous metals fell by 5.3 per cent.
Year-on-year, the price of non-ferrous metals rose in June by 38.0 per cent, with mineral oil costs up by 10.5 per cent.
Recent developments suggest there will be little respite from energy costs soon, with oil prices hitting record highs close to $80 a barrel over the past week.
There is broadening consensus that growth in Germany, Europe's largest economy, accelerated in the second quarter from the 0.4 per cent expansion in the first quarter.
The BDI industry federation said on Monday growth in gross domestic product had probably doubled from the previous quarter to around 0.8 per cent in the April-June period.
That would be the strongest expansion since the first quarter of 2001. Excluding energy, prices rose in June by 0.1 per cent on the month and 2.4 per cent on the year after May's monthly gain of 0.4 per cent and annual increase of 2.3 per cent.