Aug. 18 (Bloomberg) -- Producer-price inflation in Germany, Europe's largest economy, remained near a 24-year high in July on increased costs for energy and metals.

Goods from newsprint to plastics were 6 percent more expensive in July than a year earlier, the Federal Statistics Office in Wiesbaden said in a statement today. Economists forecast a 5.9 percent increase, according to the median of 33 estimates in a Bloomberg News survey. From June, prices rose 0.5 percent.

Faster economic growth in the dozen nations sharing the euro is giving companies more room to pass on higher costs. Consumer- price inflation in the euro region was 2.4 percent in July, exceeding the European Central Bank's target of just below 2 percent for an 18th month as oil prices rose to a record.

``It's the usual story with metals and energy costs,'' said Karsten Junius, senior economist at Dekabank in Frankfurt, one of five who forecast the correct yearly change in producer prices. ``Interest rates are going up, that's clear.''

German producer-price inflation has held above 5.2 percent since December, the highest level since July 1982, peaking at 6.2 percent in May. In June, prices increased 6.1 percent.

Crude oil rose to a record $70.72 a barrel on July 14 and traded at $70.45 today, 15 percent higher than at the start of the year. The price of copper and nickel doubled in the past year.

The ECB has said it is ready to raise interest rates further to counter inflation. The central bank said Aug. 10 that an ECB survey shows analysts have raised their expectations for inflation this year to 2.3 percent from a prediction of 2.1 percent in May.

Higher Rates `Warranted'

ECB President Jean-Claude Trichet said Aug. 3 that more rate increases may be ``warranted'' to contain inflation after the central bank raised borrowing costs for a fourth time in eight months to 3 percent. Euro-region producer prices increased a bigger-than-expected 5.8 percent in June from a year earlier.

``Persistent high oil prices, the creeping in of the consequences of the high oil prices in the producer and consumer prices have showed an upward move,'' ECB council member Klaus Liebscher said in an interview Aug. 4, adding that ``prevention is better than cure'' when it comes to keeping energy costs from feeding into wages.

Germany's IG Metall labor union said Aug. 15 it wants 7 percent more pay for workers in the iron and steel industries in the states of North Rhine-Westphalia, Lower Saxony and Bremen. Some companies are already feeling the pinch of rising costs.

Companies Raising Prices

``We expect price increases in the coming quarter,'' Wolfgang Leese, chief executive officer of Salzgitter AG, Germany's second- largest steelmaker, said in an interview Aug. 10. ``Costs have climbed and we have to pass that on somehow.''

Fuel prices rose 8.8 percent from a year earlier and heating oil costs were 25 percent more expensive, today's report showed. Prices of lead, zinc and tin surged 85 percent from July 2005 and steel costs increased 12 percent.

Continental AG, the world's fourth-biggest tiremaker, has cut annual spending by about 5 percent to cope with higher costs. The Hanover-based company said Aug. 3 that second-quarter profit dropped 18 percent.

German companies may get more room for price increases as unemployment declines and consumers step up spending to avoid an increase in a sales tax in 2007. Chancellor Angela Merkel's coalition government is raising the value-added tax to 19 percent from 16 percent, the biggest increase since the levy was introduced nearly four decades ago.

Faster Growth

Retail sales rose for a fourth month in July, the Bloomberg purchasing managers index showed Aug. 7. The jobless rate fell to 10.6 percent in July from 10.8 percent in the previous month.

The euro-region economy expanded 0.9 percent in the second quarter from the first, when it grew 0.6 percent. That's the most in six years and suggests growth in 2006 may exceed the ECB's forecast of about 2.1 percent. In contrast, the U.S. economy may expand 3.6 percent this year and 3.1 percent in 2007, the Organization for Economic Cooperation and Development estimates.

Investors are betting that the ECB will raise its benchmark interest rate to 3.5 percent by the end of the year, futures trading shows. The yield on the contract for December settlement was at 3.68 percent today, up from 3.67 on Aug. 14.

The contracts settle to the three-month inter-bank offered rate for the euro, which has averaged 16 basis points more than the ECB's benchmark rate since the currency's launch in 1999.

To contact the reporter on this story: Simone Meier at smeier@bloomberg.net

Last Updated: August 18, 2006 05:38 EDT