Bloomberg News

Euro-Area July Producer-Price Inflation Holds at 2 1/2-Year Low

September 04, 2012

The euro-area producer-price inflation rate held at a 2 1/2-year low in July as a deepening economic slump made it more difficult for companies to pass on higher costs.

Factory-gate prices in the 17-nation euro region rose 1.8 percent from a year earlier, after a similar gain in June, the European Union’s statistics office in Luxembourg said today. That’s the weakest gain since March 2010. Economists had forecast an increase of 1.6 percent, the median of 22 estimates in a Bloomberg News survey showed. From the prior month, July prices gained 0.4 percent.

European companies are seeking ways to lower costs as budget cuts discourage consumer spending and undermine export demand. Euro-area unemployment held at 11.3 percent in July, the highest on record, and economic confidence slumped in August, adding to signs the economy may have slipped into a recession.

In Germany, Europe’s largest economy, producer prices rose 0.9 percent from a year earlier, after increasing 1.6 percent in the previous month, today’s data showed. Spain and Italy reported quicker price growth.

Energy costs on the producer level advanced 4.8 percent in July from a year earlier after rising 4.7 percent in the previous month, the statistics office said. Annual price growth of intermediate goods was unchanged and costs of capital goods rose 1 percent.

The European Central Bank, which in July cut its benchmark rate to a record low 0.75 percent, will publish its updated inflation projections when policy makers meet in Frankfurt on Sept. 6.

To contact the reporter on this story: Simone Meier in Zurich at smeier@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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