European producer-price inflation accelerated more than economists forecast in January, as soaring energy costs added to the European Central Bank’s concerns that inflationary pressures are building.
Factory-gate prices in the euro region jumped 6.1 percent from a year earlier, after increasing 5.3 percent in December, the European Union’s statistics office in Luxembourg said today. That’s the fastest since September 2008 and above the 5.7 percent gain forecast by economists, according to the median of 16 estimates in a Bloomberg survey. January prices rose 1.5 percent from December.
Crude oil has surged 33 percent over the past six months, increasing pressure on companies to pass on higher costs just as some labor unions demand more pay. Consumer-price inflation in the 17-nation euro area accelerated to 2.4 percent in February and ECB officials including Juergen Stark have signaled they are ready to raise borrowing costs from a record low if needed.
“Given surging oil and food prices, we are likely to see a further acceleration in inflation in the coming months,” said Aline Schuiling, a senior economist at ABN Amro Bank NV in Amsterdam. “There is a clear risk that the central bank hikes earlier than September, which is our current call.”
The euro was higher against the dollar after the data, trading at $1.3796 at 10:02 a.m. in London, up 0.1 percent on the day.
Energy prices jumped 13 percent in January from a year earlier and the cost of intermediate goods rose 7.4 percent, the statistics office said in today’s report. Excluding construction and energy, producer prices advanced 3.9 percent in the year. In the 27-nation EU, producer-price inflation accelerated to 6.5 percent from 5.9 percent in the previous month.
The European Commission said on March 1 that euro-area inflation may average 2.2 percent this year instead of a previously projected 1.8 percent. Europe’s economy may expand 1.6 percent, above a November forecast of 1.5 percent, the Brussels-based EU executive said.
Unilever, the world’s second-largest consumer goods company, plans to offset higher input prices this year through price increases and cost savings, Chief Financial Officer Jean- Marc Huet said on Feb. 3. Volkswagen AG, Germany’s largest automotive employer, last month agreed to raise compensation for 100,000 workers by 3.2 percent.
The ECB, which aims to keep annual gains in consumer prices just below 2 percent, will publish its latest inflation projections for this year and next tomorrow after its monthly rate meeting. ECB council member Yves Mersch said in an interview on Feb. 21 the bank may raise its 2011 inflation forecast to more than 2 percent from 1.8 percent.
ECB Executive Board member Stark said last week that the ECB is “prepared to act decisively and immediately if needed” to maintain price stability, and fellow board member Lorenzo Bini Smaghi said the bank may need to reassess its policy stance.
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