Factory-Gate Inflation Falls Back to Pre-Pandemic Levels

EUROZONE APR PPI -3.2% M/M (FCST -3.1%); MAR -1.6% M/M

EUROZONE APR PPI +1.0% Y/Y (FCST+1.7%); MAR +5.9% Y/Y

• Eurozone producer prices cooled sharply again in April, falling -3.2% m/m and decelerating 4.9pp to +1.0 % y/y This was the softest annualised PPI rate since pre-pandemic January 2020, and stands over 42pp below the August record peak.
• The decline in PPI was underpinned by a sharp fall in energy prices (-10.1% m/m, -8.9% y/y), alongside a broad-based decline in price pressures due to the combination of soft demand, easing supply chains and lower commodity prices.
• Excluding energy, core PPI decelerated by 2.9pp to +5.1% y/y, with intermediate goods alone down 4.5pp at +1.3% y/y.
• The continuation of slowing PPI has been foreshadowed by recent manufacturing PMI data, implying that the May data will likely see a negative annualised headline print, having already turned deflationary in some member states (Belgium, Greece, Ireland, Italy, the Netherlands, Portugal and Spain).
• This points towards softer underlying goods CPI for the bloc, which will be further positive news for the ECB.
• Yet with eurozone services inflation elevated and PMI's flagging robust services activity, the ECB remains focused on the sticky services inflation issue.