Industry producer prices excluding construction:

March: +0.6% m/m, +0.9% y/y

MNI survey median: +0.6% m/m, +0.8% y/y
MNI survey range: +0.5% to +0.8% m/m

February: +0.1% m/m (unrevised)
January: +0.7% m/m (unrevised)
December: +0.1% m/m (unrevised)
November: +0.2% m/m (unrevised)
October: +0.3% m/m (unrevised)

FRANKFURT (MNI) – Producer price inflation in the Eurozone
accelerated as generally expected in March, with all major components
except consumer non-durables rising, Eurostat reported on Tuesday.

On the month, overall producer prices increased 0.6%, resulting in
an annual rise of 0.9%, the strongest jump since December 2008.

Excluding energy goods, whose price rose 1.7% month-over-month,
core PPI gained 0.3% from February, leaving the annual change at +0.1%.

The inflationary impact of energy prices on overall annual producer
prices is expected to diminish, but recent gains in oil prices are
likely to delay that.

In early February, Brent crude hit a trough of $69.26 per barrel.
Since then, the overall trend has been upward, with oil reaching $87.11
in late April, its highest level since October 2008. Brent crude last
traded at $86.34.

Producer prices for intermediate goods, which are often the first
to reflect more expensive commodities, rose 0.6% on the month and were
0.8% higher compared to March 2009, while capital goods output prices
were unchanged versus February, narrowing the annual decline to 0.5%.

Producer price inflation for consumer durables stabilized at +0.1%
and +0.3% on the month and year respectively. Non-durable goods prices,
however, dipped 0.1% from February, leaving output prices down 0.5% on
the year.

Among the larger Eurozone states, Spain noted the strongest monthly
jump in output prices (+0.8% m/m, +2.4% y/y), followed by France (+0.7%
m/m, +2.0% y/y), Germany (+0.7% m/m, -1.7% y/y) and Italy (+0.5% m/m,
+1.7%).

Firms polled in the April manufacturers’ purchasing managers index
(PMI) survey said input prices rose at the fastest monthly pace in the
history of the index, on the back of costlier raw materials including
energy, metals, chemicals and timber, Markit Economics, the company that
publishes the PMI report, said.

However, manufacturers also reported the first rise in output
prices in one and a half years, thus alleviating some pressure on profit
margins, Markit added.

Echoing the PMI report, a majority of firms cited in the European
Commission’s sentiment survey in April upwardly revised their
selling-price expectations. In manufacturing, the bulk of respondents
now expect prices to trend above normal in the near term, in line with
the long-term average.

Upward price pressures on oil and other commodities are expected to
continue in the near-term, as global growth translates into
strengthening demand.

“Such pressures, however, will likely be moderated by high spare
capacity and supply responses to the price rebound, albeit to varying
degrees depending on the commodity,” the International Monetary Fund
(IMF) said in its latest World Economic Outlook.

Nevertheless, in the medium term, projections suggest that
commodity prices will remain high by historical standards, as demand
increases and spare capacity and inventory cushions decline, the IMF
added.

“The tension between rapid demand and sluggish capacity growth is
therefore likely to reemerge once the global recovery matures into a
sustained expansion,” it said.

–Frankfurt newsroom +49 69 720 142; e-mail: frankfurt@marketnews.com

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