October 3, 2019 / 9:06 AM / 2 months ago

Euro zone producer prices fall more than expected in August

BRUSSELS (Reuters) - Euro zone producer prices fell more than expected in August because of a sharp drop in energy prices, data showed on Thursday, signaling weakening inflationary pressures in a slowing euro zone economy.

The European Union’s statistics office Eurostat said prices at factory gates in the 19 countries sharing the euro fell 0.5 percent month-on-month in August for a 0.8 percent year-on-year decline. Economists polled by Reuters had expected only a 0.3 percent monthly and a 0.5 percent annual fall.

The decline is a result of a 1.9 percent monthly and a 4.9 percent year-on-year drop in energy prices. Without the volatile energy component producer prices were flat month-on-month and rose 0.5 percent year-on-year, Eurostat said.

Industrial producer prices signal inflationary pressure early in the pipeline because unless their change is absorbed by intermediaries and retailers, it is transmitted to the final consumer, impacting consumer inflation.

The European Central Bank wants to keep consumer inflation below, but close to 2 percent over the medium term, but has struggled to accelerate price growth for years despite program of government bond buying on the market.

The bank decided in September to re-launch the bond purchases as inflation remained to slow.

Separately, Eurostat said retail sales, an indication of domestic demand, in the euro zone rebounded in August from a slump in July, growing 0.3 percent month-on-month for a 2.1 percent annual increase, driven mainly by strong sales of electronics, computers and Internet shopping.

Reporting By Jan Strupczewski

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