Euro Area producer prices higher in March 2011

In March 2011, euro area producer price inflation is up. The rise is closely linked to commodity prices but is also sensible for consumer goods.

Euro Area producer prices higher in March 2011
In March 2011, industrial producer prices rose further, at +6.7% YoY, after +6.6% in February. Producer price inflation remained under the record high reached in 2008 but is sharply up over the last months. The release was a bit higher than the consensus (+6.6%).

The PPI is primarily driven higher by commodities prices. In the energy sector, producer costs are up by 13% YoY and by 7.9% YoY for the intermediate goods sector. However, since last summer, the consumer goods sector is also facing a gradual rise in producer prices, to 2.8% in March 2011 from less than 1% YoY before August (previous peaks close to +5% YoY in 2008). This underlines the strong inflationary pressures that are facing the industrial sector all over the world. Higher commodity costs diffuse more and more into the supply chain.

Economic Impacts
Inflationist risks are getting stronger every month. The diffusion of costs pressures to the consumer goods sector underlines than second round effects are not so far away in the euro area. This reinforces ECB’S hawkish stance.

Market Impacts:
Forex: After the publication, EUR/USD and EUR/GBP are stable.
Commodities: stability prevails for gold. WTI oil price is down from 113$/b to 112.5 $/b.


Tuesday, May 3rd 2011

World Economic Snapshot
CB 0.25% 1.50% 6.56% 0.1% 0.5% 1% 0.25% 12.25%
GDP 2.3% 2.5% 9.8% 2.5% 1.8% 2.9% 2.4% 4.2%
Price 3.6% 2.7% 5.5% 0.3% 4.5% 3.3% 0.3% 6.1%
UR 9.2% 9.9% - 4.7% 7.7% 7.4% 3.0% 6.0%

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