Euro-Area Producer-Price Inflation Slowed in June on Energy

Euro-area producer-price inflation slowed for a ninth straight month in June, adding to sings of easing cost pressures as the region’s economic slump deepens.

Factory-gate prices in the 17-nation euro region rose 1.8 percent from a year earlier, the weakest annual gain since March 2010, after rising 2.3 percent in May, the European Union’s statistics office in Luxembourg said today. Economists had forecast a gain of 1.9 percent, the median of 14 estimates in a Bloomberg News survey showed. Prices fell 0.5 percent in the month.

European companies are cutting costs and eliminating jobs to weather an economic slowdown that has forced at least six nations into recession. With governments struggling to contain the fiscal crisis, European Central Bank President Mario Draghi pledged ahead of today’s rate decision to do whatever is needed to preserve the single currency.

“Underlying inflation pressures across the euro zone look set to be contained by weakened economic activity and high and rising unemployment,” Howard Archer, chief European economist at IHS Global Insight, said in an e-mailed note before today’s report. “While we don’t expect the ECB to cut interest rates again as soon as their August policy meeting, we believe such a move is highly likely in September or October.”

In Germany, Europe’s largest economy, prices rose 1.6 percent from a year earlier, after increasing 2.1 percent in the previous month, today’s data showed. France, Spain and Italy all reported slowing price growth.

Energy costs on the producer level advanced 4.8 percent in June from a year earlier after rising 6.3 percent in the previous month, the report showed. Annual price growth of intermediate goods was 0.1 percent, down from 0.5 percent, and costs of capital goods rose 1.1 percent.

The ECB, which last month cut its benchmark rate to 0.75 percent, a record, will announce its decision at 1:45 p.m. in Frankfurt, with Draghi holding a briefing 45 minutes later.

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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