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Core Eurozone Producer Prices Rise 0.7% in May, Energy Falls
Eurozone May PPI matched forecasts at +0.2% m/m, but core prices rose 0.7% as energy fell. The 2.8% annual core reading keeps pressure on the ECB.
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Producer prices in the euro area rose 0.2% in May, matching economists' forecasts. The headline number masked a drop in energy costs, which fell month-on-month. Excluding energy, producer prices climbed 0.7%.
On an annual basis, energy prices were up 14% from May last year. That pushed the headline annual PPI to a jump that outpaces the core reading of 2.8%.
The 0.7% monthly increase in core producer prices is the fastest in several months. It suggests pipeline cost pressures remain elevated even as energy prices ease. The European Central Bank has repeatedly flagged producer price dynamics as a leading indicator for consumer inflation. Goods inflation has been stickier than services in recent months, and the core PPI trend reinforces that concern.
The euro was little changed after the release. The print matched expectations, so the immediate market reaction was muted. Rate differentials and the ECB's policy path remain the dominant drivers for EUR/USD.
The ECB next meets in July. The persistence of core producer price increases, even as energy falls, will factor into the rate decision. If the trend continues through the summer, it could keep the ECB on a tightening bias even as the economy slows.