Prices at factory gates in the eurozone rose as fast as expected in May despite diminished pressure from energy costs, data showed on Tuesday, reinforcing expectations of further interest rate increases.
Industrial producer prices in the 12 countries using the euro rose 0.3 percent month-on-month for an annual gain of 6.0 percent, the steepest yearly increase in nearly six years, European Union statistics agency Eurostat said.
The figures, which matched analysts' expectations, showed prices in the industry were mainly boosted by unfinished goods and raw materials, with oil exerting no upward pressure in monthly terms.
"The producer price inflation data will reinforce the ECB's (European Central Bank) concerns that high energy prices are now increasingly filtering through the supply chain," said Howard Archer, chief European economist at Global Insight. Prices excluding energy increased by 0.4 percent in May from the previous month and by 2.6 percent from a year earlier.
Prices in the energy sector, the main booster of factory gate prices in past months, stayed flat month-on-month but were up 18.6 percent year-on-year. Intermediate goods, or unfinished products, raw materials and other components, rose 0.9 percent from April and 4.5 percent from the previous year.
Durable consumer goods rose 0.2 percent month-on-month and non-durable consumer goods by 0.1 percent.
Unless absorbed by intermediaries, rises in producer prices are eventually passed on to the consumer. That in turn boosts headline inflation, which the ECB wants to keep below but close to 2.0 percent.
Since December the ECB has increased its main rate by a quarter percentage point every three months, taking it to 2.75 percent in June. But its hawkish talk has raised the possibility that the next rise might be bigger, or sooner than predicted.
Eurozone inflation was 2.5 percent in June, higher than analysts had expected, Eurostat estimated last week, while economic sentiment indicators remained strong.
Growth prospects are good as indicated by the European Commission, which has kept its expansion forecasts for the second and third quarter to a range of 0.5-0.9 percent.
The Commission said last week that inflation expectations were on the rise in the EU. Eurostat said that in the eurozone, the fastest growth in producer prices was observed in Portugal, with 1.0 percent, as well as Spain, Italy and Finland, where prices rose by 0.7 percent. Prices fell 0.4 percent in the Netherlands.
In the wider, 25-nation EU, factory gate prices increased only 0.1 percent in May from April, dragged down by a 0.5 percent fall in Britain as well as decreases in Sweden and Denmark.