Eurozone Factory-Gate Prices Stall

By Paul Hannon Features Dow Jones Newswires

The prices of goods leaving the eurozone's factory gates haven't risen since January, a sign of a continued weakness in inflationary pressures despite a firming economic recovery.

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The European Union's statistics agency on Monday said that producer prices were unchanged in July from June, and were up just 2% from the same month last year. Economists surveyed by The Wall Street Journal had expected to see a 0.1% rise on the month.

The July reading means the period in which factory-gate prices have either stayed the same or fallen now stretches to six months, following a jump in January driven by higher energy costs.

That weakness has contributed to low rates of consumer-price inflation, which remains well below the European Central Bank's target of just under 2% following a slight acceleration in August.

The ECB's economists will publish new forecasts on Thursday, and some analysts expected them to lower their projections for inflation this year and next to reflect the euro's appreciation against other major currencies over recent months. As a currency grows stronger, the prices of imported goods and services falls.

In June, the ECB's economists forecast the inflation rate would fall to 1.3% next year from 1.5% this year. Any further cut would complicate policy makers' decision on the future of a bond-buying program that is tentatively scheduled to end in December.

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The pickup in growth over recent quarters, together with a steady decline in unemployment and a surge in confidence, suggests that the economy no longer needs as much stimulus as it did when the program was started in 2015. But the ECB's target is inflation, not growth, and it is far from certain it will meet its goal over coming years.

Write to Paul Hannon at paul.hannon@wsj.com

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September 04, 2017 05:14 ET (09:14 GMT)