Euro zone producer prices rose at a record annual rate of 8.0 percent in June on soaring energy costs, data showed on Monday, adding to gloomy news for the European Central Bank three days before its meeting. Prices at factory gates in the 15 countries using the euro rose 0.9 percent month-on-month, the European Union statistics office Eurostat said.
The yearly figure, up from 7.1 percent in May, was the highest since measurements started in 1991. Economists polled by Reuters had expected a 0.8 percent monthly increase and a 7.9 percent yearly rise. Factory prices were driven in June by the cost of energy, which surged 2.7 percent on the month and 21.4 percent annually.
Oil traded above $126 a barrel on Monday, but was well down on June's records above $140. Many economists expect inflation to start falling after August unless oil prices rise again. "It's still the impact from oil which was pretty strong in June. We can find some comfort in this area that with oil at about $125 a barrel we should gradually see some better figures for PPI in coming months," said Gilles Moec, economist at Bank of America.
Core producer price inflation, a measure excluding the volatile energy and construction components, came in at 0.4 percent month-on-month and 4.6 percent annually - against 0.5 percent and 4.3 percent respectively in May. Producer prices are an early indication of inflationary pressure because increases, unless absorbed by retailers via lower profit margins, eventually translate into higher costs for consumers.
The ECB is widely expected to leave borrowing costs unchanged when it meets on Thursday despite a surge in consumer price inflation, following a series of data pointing to a sharp slowdown in the eurozone. The central bank raised its main interest rate in early July to 4.25 percent from 4.0 percent after inflation reached 4.0 percent year-on-year in June, more than double the ECB target. Price growth accelerated to 4.1 percent in July.