June: flat m/m, +5.9% y/y

MNI survey median: +0.1% m/m, +6.0% y/y
MNI survey range: -0.1% to +0.3% m/m

May: -0.2% m/m, +6.2% y/y

FRANKFURT (MNI) – Producer prices in the Eurozone were unchanged
between May and June as cheaper energy output prices offset costlier
intermediate, capital and non-durable consumer goods, Eurostat reported
on Tuesday.

Annual PPI eased to +5.9%, its weakest level since the start of the
year.

Excluding energy production prices, which fell 0.3% m/m but were
10.7% higher on the year, core PPI increased 0.1% and 4.2% on the month
and year, respectively.

Intermediate goods production price inflation continued to ease,
slipping to +0.1% on the month to give an annual rate of +6.4%, while
capital goods accelerated to +0.2% m/m, resulting in an annual figure of
+1.4%.

Consumer durables prices were unchanged on the month and up 1.7% on
the year. Non-durables rose 0.1% m/m to lift prices 3.7% above June
2010’s level.

While output prices in Germany, Italy and Spain all rose 0.1% on
the month, French PPI fell by the same amount to its lowest level in
three months.

In annual terms, German PPI registered +5.6%, France +6.1%, Italy
+4.7% and Spain +6.7%.

While oil prices have since recovered from four-month lows in June
after the International Energy Agency announced the release of strategic
reserves to counter the supply disruptions in Libya, recent indicators
suggest that pipeline price pressures may be waning.

Manufacturers polled in the July factory PMI reported the lowest
level of cost inflation in a year and a half, as global demand for raw
materials decreased. Output price inflation eased to its slowest pace in
eight months.

Selling price expectations also declined last month, as the
proportion of manufacturers looking to hike prices fell to the lowest
level since November, a European Commission poll showed.

However, these trends are unlikely to reduce pressure from the ECB
Governing Council’s most ardent hawks for a further normalisation of
monetary policy.

Speaking in Tokyo last week, Yves Mersch warned that “the
combination of dynamic economic growth, accompanied by accelerated
inflation in emerging markets, bears the risk that imported inflation
will come to play a larger role in domestic price levels in the
industrialized world.”

“The recent increases in prices of certain agricultural products
and raw materials may therefore be more persistent than currently
assumed,” Mersch said. “The lagged effect of food prices could still add
a layer of headline inflation.”

— Frankfurt bureau: +49-69-720 142; email: frankfurt@marketnews.com —

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