Massive Eurozone PPI Surge Puts Pressure On ECB


Eurozone PPI surged in January, with producers paying 1.5% more, month-over-month, from December 2010 to January 2011, according to Eurostat. That’s the biggest gain since January 1982 and big beat on the 1.1% expectation.

Notably energy prices were up 3.2% and intermediate goods 1.5%, while many of the other categories, like capital goods, non-durable consumer goods, and durable goods were only up slightly.

Looking a little deeper into the release, Spain experienced a 2.4% month-over-month jump in their PPI. That’s got to be worrying for the ECB, because Spain isn’t exactly an economy running on all cylinders, with unemployment of 20.4%. The same problem is there, to a lesser extent, in Portugal. Things are going well in other parts of the EU, however.

Adding all this to Eurostat’s headline inflation number for the eurozone at 2.4%, and it seems certain the ECB will talk more hawkishly Thursday. A rate hike isn’t likely in the cards just yet, particularly because a lot of the inflation being seen in the region is from food and energy, which a rate hike can’t really fix.

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