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Eurozone producer prices hit record high as inflation spreads beyond energy

Eurozone producer prices have risen at the fastest rate since the launch of the single currency more than two decades ago, prompting central bankers to warn that inflationary pressures are getting too broad and too high.

Prices charged by industrial producers in the 19 countries that share the euro rose 37.2% in the year to April, from a record high of 36.9% in March, wholesale prices consumer goods such as food and drink contributing to the outbreak. , according to Eurostat data released on Thursday.

The figures were released as policymakers at the European Central Bank prepare to meet in Amsterdam next week, when they are due to present their plans for raising interest rates in July for the first time in addition to a decade with the aim of bringing consumer price inflation down to its level. 2% target.

The surge in producer prices came despite a slowdown in the growth of wholesale energy prices, a sign that inflationary pressures are building beyond the sharp increases in oil and gas costs caused by the fallout from the the Russian invasion of Ukraine in February.

“If you look at inflation rates, they’ve been stretching beyond energy for quite some time,” said Oliver Rakau, chief German economist at Oxford Economics.

“There is always a chain of events and there is no denying that rising energy and commodity prices will spill over into other commodities, such as food and beverage prices, and that could lead to higher restaurant prices, pushing up service inflation,” he said.

Ex-factory prices for consumer non-durables, such as food and drink, rose 11.2% – their first-ever double-digit percentage increase. Manufacturers of durable consumer goods, such as furniture and cars, sold them 8.5% more than a year earlier. Despite a slowdown in wholesale energy prices, they still rose 99.2% in the year ending April.

Francois Villeroy de Galhau, governor of France’s central bank and member of the ECB’s governing council, signaled that it was preparing to raise rates to deal with soaring prices. “Inflation is not only too high, but also too wide. This requires a normalization of monetary policy,” Villeroy said in a speech Thursday.

Some ECB board members have said it could follow in the US Federal Reserve’s footsteps and raise its key rate by half a percentage point in July, especially if core consumer inflation – excluding energy and food prices – continued to rise faster than expected.

In the year to May, consumer prices in the euro area rose by a record 8.1%, while core inflation also accelerated to 3.8%, both faster than expected by most economists.

Higher factory gate inflation is likely to fuel, at least in part, higher consumer prices as some companies pass their costs on to buyers – although the link between the two is not always clear. .