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Situation

• On a monthly basis Producer prices rose by 0.34% (0.43% in Apr’07)
• On an annual basis Producer prices rose by 2.36% p.a ( 2.37% p.a in Apr’07)

Background

1. Oil prices have risen by 6.29% on an average in Jun’07 (over May’07). This cause Core CPI ( ex Energy) to start rising.
2. The European Commercial bank ( ECB) aims at inflation ( CPI ) rates of below, but close to, 2% over the medium term. The ECB in its meeting on Jun’07 further raised the bank rate by 0.25 basis points to 4.00%.
3. European GDP has been expanding in Q1 2007
4. The ECB has a monetary Policy meeting on July 5th 2007

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Conclusion

• A slight rise in PPI towards 2.50% p.a towards Sept’07 can be expected thanks to the rise in energy  prices in recent times.
• The effect of the rate hikes should push PPI down to the ECB target areas of 2.00% p.a to 1.50% p.a post Sept’07

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Related links

• USA - Inflation (specially core) faces a rising risk
• Europe - Producer Prices in Apr’07 rise at its slowest pace since Jul’04
• Japan - Producer prices rise in Apr’07

• Europe - Inflation down in May’07, but rising energy prices can change this picture
• UK : Inflation ( CPI and PPI ) drops in May’07
• Japan - Inflation indices ( CPI ) deflate in Mar’07
• India - marginal drop in inflation ( CPI )

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