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Eurozone April Producer Price Inflation At 25-Month Low

Eurozone April Producer Price Inflation At 25-Month Low

Mirroring easing inflationary pressures, Eurozone industrial producer price inflation fell to a 25-month low in April, giving room for the central bank to lower its interest rates below 1 percent.

Pipeline inflation eased more than expected to 2.6 percent in April, the lowest since March 2010, from 3.5 percent in March, the latest figures from Eurostat showed Monday. The expected inflation rate was 2.7 percent.

While fall in oil prices helped to maintain manufacturers' margin, weak manufacturing activity limited the ability of companies to hike their prices.

The producer price index remained flat month-on-month in April against forecast for a 0.2 percent increase. In March, there was a 0.5 percent rise in overall industrial producer prices.

Excluding construction and energy, core monthly inflation held steady at 0.2 percent in April. Annually, core producer price inflation slid to 1.3 percent from 1.6 percent.

Energy price inflation fell to 6.8 percent annually from 9 percent. Likewise, non-durable consumer goods and durable consumer goods prices rose at a slower pace of 2.4 percent and 2 percent, respectively. Capital goods gained 1.1 percent and intermediate goods moved up 0.6 percent.

In the EU27, producer price inflation came in at 2.8 percent, down from 3.9 percent a month ago.

Among the member nations of the region, the largest increases were observed in Cyprus, Lithuania and Hungary. The only decrease was logged in Sweden.

In May, Eurozone inflation fell to a 15-month low of 2.4 percent, but remains above the European Central Bank's 'below, but close to 2 percent' target.

Policymakers of the European Central Bank are meeting on June 6. In May, the Governing Council led by Mario Draghi kept the interest rates unchanged for the fourth month in a row. The key rate remains at a record low 1 percent.

The central bank will possibly prefer to wait and see what happens in the upcoming Greece election as well as near term growth before acting in June, IHS Global Insight's Chief European Economist Howard Archer said. He expects the ECB to trim interest rates in the third quarter, with July a very real possibility.

Elsewhere, a survey from think tank Sentix showed that confidence amongst investors declined to a three-year low in June. The corresponding index fell to -28.9 in June from -24.5 in May.

by RTT Staff Writer

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