Producer prices across the European Union and the euro area rose faster than expected in July, according to Eurostat figures released this week. Euro area producer prices climbed 1.6 percent on the month, well above the 1.2 percent gain economists had pencilled in, and were up 5.8 percent from a year earlier. The wider EU saw producer prices rise 1.4 percent in July, taking the annual rate to 5.6 percent.
Energy drives the surprise
Eurostat attributed much of the monthly jump to energy, where prices rose 5.6 percent and pulled the headline figure well past forecasts. Ireland recorded the sharpest monthly increase among member states, with producer prices up 4.3 percent. Spain and Italy each posted monthly gains of 3 percent.
Not every country moved in the same direction. Estonia’s producer prices fell 3.3 percent on the month, the steepest monthly decline recorded, while Finland dropped 1.6 percent and Sweden slipped 1.1 percent. The divergence across the bloc points to how unevenly the energy-driven pressure was felt from one economy to the next.
Wide gaps in annual rates
The annual figures showed an even starker spread across the union. Ireland’s producer prices were up 14.8 percent from a year earlier, the highest reading among EU members, followed by Lithuania at 12.9 percent and Bulgaria at 12.5 percent. Luxembourg stood at the opposite end of the scale, with producer prices down 7.3 percent on the year.
The July data lands against a backdrop of diverging inflation gauges. Euro area annual inflation has more recently been running at 1.9 percent, well below the pace of producer price growth recorded in July, while the European Central Bank’s main refinancing rate has stood at 2.25 percent since 3 September. The euro traded at $1.1628 as markets weighed the latest price signals from the bloc’s factory gate.
Related: Euro area inflation hits 3.3%, matching forecasts
Source: Eurostat | Data: European Central Bank · Swissquote · FRED — St. Louis Fed
