Europe Producer-Price Inflation Unexpectedly Accelerates on Jump in Energy
By Jones Hayden - May 3, 2011 6:20 PM GMT+0900
Factory-gate prices in the euro region jumped 6.7 percent from a year earlier, the fastest since September 2008, after a 6.6 percent gain in February, the European Union’s statistics office in Luxembourg said today. Economists had projected a March increase of 6.6 percent, according to the median of 13 estimates in a Bloomberg news survey. In the month, prices advanced 0.7 percent.
European companies are trying to pass on higher input costs, including a 31 percent oil-price jump in the past year, just as the economic recovery appears to be faltering. That has helped push consumer-price inflation above the ECB’s 2 percent limit. The central bank last month raised interest rates for the first time in almost three years.
“Pipeline inflation pressures in the euro zone remain intense,” said Martin van Vliet, an economist at ING Groep NV in Amsterdam. “The risk of high consumer-price inflation spilling over into wages will keep the ECB in a tightening state of mind.”
10-Year Bonds
German 10-year bonds fell after the producer-price data. The 10-year yield rose three basis points to 3.28 percent as of 10:04 a.m. in London. The euro was lower against the dollar, trading at $1.4804, down 0.2 percent.
Consumer-price inflation accelerated to the fastest in more than two years in April and confidence in the economic outlook weakened as higher energy prices threatened to undermine growth. Euro-area expansion will slow to 1.6 percent this year from 1.8 percent in 2010, the European Commission forecast last month.
“We have risks of second-round effects here and there,” ECB President Jean-Claude Trichet said in a newspaper interview last week, referring to an increase in consumer prices prompting bigger wage increases that feed through to faster inflation.
MAN SE, Europe’s third-largest truckmaker, is monitoring the risk of accelerating inflation in Europe, as well as in China and Brazil, with price increases “something to watch” in all its markets, Chief Financial Officer Frank Lutz said today in an interview on Bloomberg Television’s “On the Move” with Francine Lacqua.
Benchmark Rate
ECB policy makers, who increased the benchmark rate by a quarter point to 1.25 percent last month, next convene on May 5 in Helsinki. Some economists expect them to signal that another move will come as soon as June.
Energy prices at the producer level jumped 13 percent in March from a year earlier and the cost of intermediate goods rose 7.9 percent, the statistics office said in today’s report.
The Frankfurt-based central bank forecasts euro-region inflation will average about 2.3 percent this year and 1.7 percent in 2012. Economists predict two more quarter-point increases in the ECB’s benchmark rate to 1.75 percent this year, according to a Bloomberg survey.
To contact the reporter on this story: Jones Hayden in Brussels at jhayden1@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
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