Tuesday, August 03, 2021
Producer prices in the euro area
Inflation indicator is increasing at record speed
Since the establishment of monetary union in 1999, prices for producers in Europe have never risen as quickly as in June. In Ireland, Belgium and Denmark in particular, it is becoming significantly more expensive for producers. Experts assume that the rise in prices will also reach consumers.
A much-noticed harbinger of inflation for the eurozone is rising more sharply than ever before: producer prices for industrial products rose at a record pace in June. They increased by 10.2 percent compared to the same month last year, as reported by the Eurostat statistics office. This is the highest value since the start of monetary union in 1999.
In May there was still an increase of 9.6 percent. Energy became more than a quarter more expensive. Pre-products cost 10.6 percent more than a year ago because there are global bottlenecks – for wood and steel, for example.
The producer prices are considered to be a leading indicator for the development of inflation. In the statistics, the prices are kept ex-factory – i.e. before the products are further processed or go on sale. You can use it to give an early indication of the development of consumer prices. It is unclear how much the higher prices will be passed on to consumers.
Inflation in the euro area is currently picking up speed and is exceeding the target set by the European Central Bank (ECB). Consumer prices rose by 2.2 percent within a year in July. This is the highest rate since autumn 2018. In the medium term, the ECB is aiming for two percent inflation as the ideal value for the economy.
Industrial producer prices rose in all Member States. In Ireland the increase was particularly high at 42.5 percent, followed by Belgium with 20.7 percent and Denmark with 19.1 percent. In Germany, producer prices rose by 7.6 percent. Experts such as Commerzbank economist Ralph Solveen assume that the strong inflation at producer level will reach consumers in Germany. “This is increasingly having an impact on the prices of the end products, which should also make itself felt in the coming months at the consumer level,” said the analyst.
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