December: -0.2% m/m, +4.3% y/y

MNI survey median: -0.1% m/m, +4.3% y/y
MNI survey range: -0.2% to +0.4% m/m

November: +0.2% m/m, +5.4% y/y
October: +0.1% m/m, +5.5% y/y
September: +0.3% m/m, +5.8% y/y
August: -0.2% m/m, +5.8% y/y
July: +0.4% m/m, +6.1% y/y
—

FRANKFURT (MNI) – Eurozone producer prices fell slightly more than
expected in December on cheaper energy and intermediate goods, Eurostat
said Thursday.

The 0.2% monthly downturn left prices 4.3% higher on the year.
Excluding energy, prices eased 0.1% for the third month in a row and
were 2.6% higher on the year.

After three months of solid gains, energy prices slid 0.4% on the
month, giving an annual rise of 9.5% after +12.4% in November.

The downturn in energy costs may prove short-lived. After falling
over 2% in December, oil prices more than reversed the drop in January
as tensions between the West and Iran increased. OPEC Secretary-General
Abdalla el-Badri warned this week of “price swings” as Europe searched
for alternative sources of crude normally imported from Iran. “During
this period, there will be volatility,” he said.

Intermediate goods prices, usually the first to reflect the trend
in commodities, declined for the fourth month in a row — by 0.2% in
December — but were still 2.8% higher on the year.

Capital goods prices were again unchanged on the month and 1.5%
higher on the year. The moderate upward trend for consumer goods was
interrupted in December, leaving durables prices up 2.3% on the year and
non-durables up 3.2%.

Many commodities have regained momentum of late on the back of
still buoyant demand in emerging economies. The January PMI polls showed
factory input prices rising for the first time in four months, boosted
by costlier fuel and raw materials. Output prices increased at a slower
pace, as strong competition and weak demand prevented companies from
passing on costs fully to their customers.

Producers hope to stem this squeeze on margins in the near term,
the European Commission’s sentiment surveys suggest. Sector
selling-price expectations recovered for the third month in a row in
January to the highest level since August, surpassing the long-term
average.

The slowdown in producer price inflation adds to the evidence that
pipeline price pressures are easing and should help bring down consumer
price inflation to the European Central Bank’s target rate of close to
but less than 2%.

“Looking ahead, [inflation rates] are likely to stay above 2% for
several months to come, before declining to below 2%,” ECB President
Mario Draghi said recently. “This pattern reflects the expectation that,
in an environment of weaker growth in the euro area and globally,
underlying cost, wage and price pressures in the euro area should remain
modest.”

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

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