European Producer Prices Increase the Most Since 2008, Adding to ECB Fears
European producer prices rose at the fastest annual pace in more than two years in December after energy costs surged, adding to the European Central Bank’s inflation concerns.
Factory-gate prices in the euro region jumped 5.3 percent from a year earlier, the most since October 2008, after increasing 4.5 percent in November, the European Union’s statistics office in Luxembourg said today. Economists had forecast a gain of 5.2 percent, the median of 18 estimates in a Bloomberg survey showed. Prices rose 0.8 percent from November.
Crude oil prices have surged 12 percent over the past six months, adding pressure on companies to pass on costs to protect earnings. Euro-area consumer-price inflation also accelerated more than economists forecast in January, and ECB President Jean-Claude Trichet said on Jan. 26 that the bank will “do what is necessary” to maintain price stability. Policy makers are scheduled to meet in Frankfurt tomorrow.
The ECB “is likely to reinforce their anti-inflation rhetoric” at the meeting, said Howard Archer, chief European economist at IHS Global Insight in London. “We believe that the lid will be kept down on underlying inflation by euro-zone growth being relatively muted and bumpy” in 2011.
The euro was little changed after the report, trading at $1.3824 at 11:01 a.m. in Frankfurt, down from $1.3829 yesterday.
Energy Prices
Energy prices jumped 11.3 percent in December from a year earlier and the cost of intermediate goods rose 6.2 percent, the statistics office said. Excluding construction and energy, producer prices rose 3.3 percent in the year. In the 27-nation EU, producer-price inflation accelerated to 5.9 percent in December from 4.8 percent in November.
Adding to signs of increasing cost pressures, manufacturers’ input-price inflation accelerated from Germany to France and Spain last month, Markit Economics said in a report yesterday. Households last month forecast faster inflation over the coming year and German import prices jumped an annual 12 percent in December.
Henkel AG, the German maker of Persil detergent and Loctite glue, plans to raise some prices this year to compensate for increasing raw-material costs, Chief Financial Officer Lothar Steinebach said in an interview at the World Economic Forum in Davos, Switzerland, on Jan. 27. Tiremaker Continental AG has said that increasing costs will weigh on profit growth.
Annual Gains
The ECB, which aims to keep annual gains in consumer prices just below 2 percent, forecasts inflation will average about 1.8 percent this year and around 1.5 percent in 2012. Trichet said on Jan. 13 that there’s “evidence of short-term upward pressure” on price developments.
“We continue to expect the tightening cycle to start only toward year-end,” said Marco Valli, chief euro-region economist at UniCredit Bank AG in Milan. Still, the “central bank wants to sound tough now to keep price expectations from drifting higher -- the ECB’s worst nightmare -- and avoid falling behind the curve.”
To contact the reporter on this story: Simone Meier in Zurich at smeier@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
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