Energy costs push euro zone factory prices up in December

Tuesday 04 February 2014 12.02
Prices at factory gates in the euro zone in 2013 rose by 0.2% in December
Prices at factory gates in the euro zone in 2013 rose by 0.2% in December

More expensive energy made euro zone producer prices grow faster than expected month on month in December, data showed today.

But year-on-year prices still fell, which pointed to risks of deflation that the ECB will have to address later this week. 

Prices at factory gates in the euro zone in 2013 were up 0.2% in December against November, the EU's statistics office Eurostat said. 

Analysts polled by Reuters expected prices to rise 0.1% on the month. But compared with the same time the previous year, producer prices still fell 0.8%, even though the pace slowed from a 0.9% fall in November.

Changes in producer prices indicate inflationary pressures early in the pipeline because unless absorbed by retailers, they eventually translate into consumer inflation, which the European Central Bank wants to keep below, but close to 2%. 

Consumer inflation unexpectedly fell in January, raising pressure on the ECB to consider fresh policy action on Thursday to counter deflation risks and support a weak euro zone recovery that may be running out of steam. 

The monthly rise in producer prices, the first one in three months, was driven by a 0.5% increase in the costs of energy, followed by a 0.1% rise in the prices of non-durable consumer goods. 

While prices at factory gates in Europe's largest economy Germany started growing for the first time in three months by 0.1%, producer price growth in the second largest France slowed to 0.2% in December from 0.5% in November.    

Producer prices in the southern periphery of the euro zone, slowly regaining competitiveness through years of  austerity policies, went up in December, rising 1.1% on the month in Spain, 0.4% in Portugal and 0.1% in Greece.    

The European Central Bank will hold its monthly monetary policy meeting on Thursday in Frankfurt, but analysts polled by Reuters expected it will keep the key interest rate at their record lows of 0.25%.