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PPI Cools to Two-Year Low in March

MNI (London)

EUROZONE MAR PPI -1.6% M/M (FCST -1.7%); FEB -0.4%r M/M

EUROZONE MAR PPI +5.9% Y/Y (FCST +5.8%); FEB +13.3%r Y/Y

  • Eurozone factory-gate inflation was in line with consensus expectations in March, slowing a substantial 7.4pp to +5.9% y/y. This is the softest rate in two years, and extends the decline from the record high of +43.4% y/y in August.
  • PPI fell -1.6% m/m in March, having declined for four of the previous five months.
  • Falling energy prices drove the bulk of the March deceleration. Excluding energy, PPI rose a marginal +0.2% m/m, whilst still cooling 2.2pp to +8.0% y/y as intermediate, capital and consumer goods annualised inflation rates slowed. The +0.9% m/m increase in nondurables prices implies that food goods inflation remains acute.
  • Irish PPI, which is exposed to volatile effects of multi-national pricing, is likely to have distorted the headline y/y somewhat to the downside due to their marked -29.9% y/y March print.
  • Looking forward, the continuation of slowing PPI has been foreshadowed by softening prices in April PMI data. Slowing demand and improved delivery times saw input costs fall at the fastest pace in close to three years in the April manufacturing PMI.
  • Yet with energy and goods inflation largely driving slowing eurozone inflation rates, focus at the ECB remains on sticky services prices for now.

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