There was a more than expected rise in the producer prices in the euro zone in the month of April driven by a sharp rise in the prices of energy products, showed data published by the European Union’s statistics office Eurostat.
There was a 1 per cent month on month increase in the prices at factory gates in the 19 country bloc sharing the currency euro, Eurostat said, while the rise was marked at 7.6 per cent compared to the same month a year ago. According to the average estimates of analysts as polled by Reuters expected the number to come in at 0.9 per cent month on month and at 7.3 per cent year on year for the month of April.
The month on month price rise was the highest in the intermediate goods section as it rose by 1.0 per cent while the second biggest rise was seen in the prices of energy which rose by 1.8 per cent. However energy prices rose the most in year on year terms as prices increased by as much as 20.4 per cent for the month of April in 2021 compared to same month a year ago. The price rise of 6.9 per cent year on year was noted for intermediate goods.
If the energy prices, which are very volatile, were to be discounted the monthly rise of producer prices would have been exactly as expected by economists – at 0.9 per cent month on month and would have been at 3.5 per cent year on year.
Companies are often seen to directly pass on any changes in producer prices to their customers. An acceleration of consumer inflation of 2.0 per cent year on year was estimated in Eurostat’s first estimate of consumer inflation for the month of May as disclosed last Tuesday, compared to 1.6 per cent year on year in April – which was also estimated to primarily because of a surge in energy costs.
For the medium time period, consumer price growth “below but close to 2 per cent” has been the target of the European Central Bank.
The rate of inflation for the euro zone will temporarily rise above its target for the current year because of a surge in the prices of energy, the bank has warned. However the central banker of the euro zone has also said that for years to come, the rate of inflation in the region will remain below the target starting from next year. That would primarily be because of stagnation in the wage growth which is a necessary component for achieving inflation for a sustained period of time.
(Adapted from USNews.com)