Industry producer prices excluding construction:

May: +0.3% m/m, +3.1% y/y

MNI survey median: +0.3% m/m, +3.1% y/y
MNI survey range: +0.1% to +0.7% m/m

April: +1.0% m/m (revised from +0.9%)
March: +0.6% m/m (unrevised)
February: +0.1% m/m (unrevised)
January: +0.7% m/m (unrevised)
December: +0.1% m/m (unrevised)
—

FRANKFURT (MNI) – Eurozone producer prices slowed in May as
generally expected, as stagnant energy prices partially offset the other
components, which continued to become more expensive, Eurostat said
Friday.

Energy prices alone were unchanged on the month after a 1.9% surge
in April, reflecting the abrupt downturn in crude oil prices at the
beginning of the month. Excluding energy, core producer prices were 0.4%
higher on the month, but were up only 1.7% on the year.

Energy base effects explain most of the fluctuations in annual PPI
rates over the past months, including the recent rise. Their impact
should wane in June, as Brent oil prices were up less than 9% on the
year after a surge of over 30% in May.

Oil market fundamentals argue for tamer price trends in the years
ahead, according to International Energy Agency. “For the next few
years, the oil market is marked by more comfortable spare capacity than
envisaged last year, and the duration of the current gas glut is set to
last beyond 2013, at least in some regions,” it forecast last month.

Other commodity prices could offset this, however, with demand
expected to strengthen and remain at “elevated levels by historical
standards”, as the global economic recovery firms, the International
Monetary Fund said in a recent report.

Costlier commodities have been the main driver of intermediate
goods prices, which rose another 0.8% in May for a 3.9% increase on the
year.

Capital goods output prices continued to grow at a monthly rate of
0.1%, giving an annual growth rate of +0.2%.

Durable consumer goods prices accelerated to a monthly growth rate
of +0.2%, resulting in an annual print of +0.7%, while non-durable goods
producer price inflation held steady at +0.1% monthly, narrowing the
annual decline to -0.1%.

Among the largest Eurozone states, France registered the sharpest
slowdown in monthly PPI inflation with a flat reading, down from +1.0%
in April and resulting in a +4.3% annual figure. The slowdown in Spain
was less drastic at +0.2% after +1.0%, to give an annual change of
+3.8%.

Annual Italian PPI inflation also came to +3.8%, which implied a
monthly price change of +0.5% from April’s +1.2%. In Germany, the price
index slowed to a growth rate of +0.3% from +0.8%, leaving PPI up by a
modest 0.7% on the year.

The rise in Eurozone factory input costs slowed markedly in June,
while continuing to outpace the increase in output prices, according to
polls of purchasing managers. Output prices actually accelerated
somewhat, suggesting that firmer demand allowed producers to pass on a
larger share of their rising input costs to clients.

Reflecting the PMI results, an above-average proportion of
manufacturers in June continued to expect selling prices to trend above
normal in the near term, the European Commission reported.

The country breakdown, however, showed divergences in trends. In
Germany, France, Italy and the Netherlands, producers still foresee
prices rising, while in Spain, Portugal and Greece, respondents were
split on the direction or expected a downward trend.

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

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