March: +0.7% m/m, +6.7% y/y

MNI survey median: +0.5% m/m, +6.5% y/y
MNI survey range: +0.4% to +1.3% m/m

February: +0.8% m/m, +6.6% y/y

FRANKFURT (MNI) – Eurozone producer price inflation was stronger
than expected in March, fueled by further and increasingly stronger
gains in energy, Eurostat reported on Tuesday.

On the month, output prices rose 0.7%, down slightly from
February’s rise, but enough to widen the annual increase to 6.7% from
+6.6% previously.

Excluding energy prices, which were up 1.9% from February and 13.0%
on the year, core PPI rose by a more subdued 0.2% m/m, resulting in an
annual change of +4.5%.

After easing in late March, oil prices have since rebounded and
have stayed on an upward trend since mid-April near three-year highs,
suggesting that energy will continue to drive up producer prices.

Among the other components of the producer price index,
intermediate goods output prices slowed to +0.3% m/m to give an annual
rate of +7.9%. Capital goods prices were unchanged compared to
February’s level, cutting the y/y change to +1.2%.

Consumer durables were 0.1% more expensive at the factory gate than
in February, leaving the annual rate unchanged at +1.8%, while
non-durable producer prices were up 0.3% and 2.9% on the month and year,
respectively.

Monthly output price inflation was strongest in Spain and France
(both +0.9%) among the larger Eurozone states, followed by Italy
(+0.7%), and Germany (+0.4%).

Outside of the big four EMU economies, Greece’s monthly producer
price inflation (+1.5%) was the highest, followed closely by Finland
(+1.3%) and the Netherlands (+1.2%).

The April manufacturing purchasing managers index showed
factory-gate prices rising nearly as fast (61.0) as March’s record pace,
despite a further slowdown in input costs (78.9) to the weakest rate
this year. This points to a recovery in firms’ pricing power and little
respite from cost-driven inflation in the near term.

Selling price expectations in industry also saw little downward
movement in April, according to European Commission’s survey.

With Eurozone consumer price inflation accelerating further to an
annual rate of 2.8% in April, the European Central Bank is unlikely to
hesitate long before raising interest rates again. Analysts expect the
next rate hike by July at the latest or even in June, if President
Jean-Claude Trichet gives the signal this week.

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

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