September preliminary: +0.3% m/m, +5.8% y/y

MNI survey median: +0.3% m/m, +5.8% y/y
MNI survey range: -0.2% to +0.5% m/m

August revision: -0.2% m/m, +5.8% y/y (-0.1%/+5.9%)

PARIS (MNI) – Eurozone industry producer prices recovered much as
expected in September on a rebound in energy, Eurostat said Friday.

After a 0.8% downturn in energy prices in August pulled the overall
index down by 0.2%, energy bounced back 1.0% in September, lifting the
PPI by 0.3%. Excluding energy, core PPI rose only 0.1% for the fourth
month in a row.

In other sectors, prices remained tame. Intermediate goods prices
were flat for the fourth month in a row, reflecting the ongoing slowdown
in most commodity prices. Capital goods prices were also unchanged on
the month, while those for consumer non-durables edged up 0.1%. Durables
prices, by contrast, rose 0.4% on the month, perhaps because costlier
imported products have given domestic producers some pricing leeway.

Annual changes show pipeline price pressures diminishing, apart
from energy, which was up 12.2% on the year in September. The annual
gain for intermediate goods declined to 5.0% from 7.3% five months
earlier. The annual rise for other sectors was 3.5% or less.

Producer prices have slowed markedly since last spring, posting a
cumulative increase of only 0.3% since April.

While the rebound in crude oil prices in October points to higher
production costs in the short term, the slowdown in economic activity
worldwide is already dampening other commodity prices and is likely to
weigh on oil as well in the months ahead. The IMF index for fuel and
non-fuel commodity prices has been declining gradually since April.

According to the October manufacturing PMI, the recent drop for
several commodities led to the first dip in Eurozone input prices (48.8)
in over two years, with nearly all reporting countries benefitting. As
cost pressures eased and new orders declined, companies held off on
sales price hikes (50.0) for the first time in 19 months.

With the downside risks to Eurozone activity now “materializing”
and a “mild recession” looming, ECB President Mario Draghi was able to
offer assurances Thursday that consumer price inflation would begin to
slow soon and fall below 2% next year.

Waning demand will sap whatever pricing-power producers still have
and rising unemployment will dampen labor cost trends. Even if
factory-gate prices pick up in the short term, the medium-term trend is
toward moderation if not decline. Overall inflation is peaking and
should not rear its head again for a long time to come.

–Paris newsroom +331 4271 5540; email: ssandelius@marketnews.com

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