Euro zone producer prices drop for 5th month, below year ago level

Euro zone producer prices fell for a fifth consecutive month in May, data showed on Wednesday, and were lower than a year earlier for the first time since the end of 2020.

The European Union’s statistics office Eurostat said prices at factory gates in the 20 countries sharing the euro fell 1.9% in May from April and were down 1.5% year-on-year.

Economists polled by Reuters had expected a monthly fall of 1.8% and a 1.3% year-on-year decline.

Producer prices are an early indication of trends in consumer inflation, which the ECB wants to keep at 2.0% over the medium term, but which stood at 5.5% in June.

The ECB raised its deposit rate to 3.5% in June, the highest level in 22 years, and has all but guaranteed another hike in borrowing costs in July.

The monthly fall in euro zone producer prices in May was due to a 5.0% drop in energy costs, a 1.0% easing in prices of intermediate goods and a 0.1% decline of prices for non-durable consumer goods, such as clothing and food.

Lower energy prices also held the year-on-year reading down. Without energy, producer prices were 3.4% higher than a year earlier, with a 9.8% increase for non-durable consumer products.

Durable consumer goods were also 6.7% higher and capital goods up 5.6% up year-on-year.