PRODUCER PRICES IN EUROPE ROCKET UP AT RECORD PACE

Across the 19-country Eurozone, the prices manufacturers charge for their products leaving the factory spiked 37.2 percent in April, year over year, the fastest since the euro common currency was created in 1999.

April’s pace outstripped March’s record of 36.9 percent.

Factory gate prices for non-durable consumer goods, such as food and beverages, climbed 11.2 percent, their first-ever double-digit annual rise. Durable goods, such as cars and appliances designed to last more than three years, sported prices 8.5 percent higher than in April 2021.

Energy prices eased slightly in April from March, but still virtually doubled—up 99.2 percent—year on year. 

Despite softer energy costs, producer prices still moved up for the month, indicating that price pressures are embedded more widely across Europe’s economy.

Inflation “has been broadening beyond energy for quite a while,” Oliver Rakau, Oxford Economics’ chief economist for Germany, told the Financial Times.

“Higher energy prices will feed through into other products, like food and drink prices, and that could lead to higher restaurant prices, which pushes up services  inflation,” he noted.

Consumer prices leaped by a record 8.1 percent in the Eurozone during the 12 months ending 31 May.

The European Central Bank’s (ECB’s) governing council will meet this week to lay plans for raising interest rates above -0.50 percent, where they have remained since 2014.

The council is likely to raise its key rate a quarter-point in July and again in September, ECB chief economist Philip Lane said last week in a statement cited by the FT.

The two rates would bring the interest rate to zero, an inconsequential change in the battle against inflation.

Some members of the council are expected to press for a stiffer increase, the FT noted.

TREND FORECAST: As we have long noted, the ECB raising interest rates in July, is a joke. Despite inflation spiking to new records over the past seven months, and their bullshit that when inflation hits 2 percent they would raise interest rates, they have not raised them for eight years. 

Therefore, as with the U.S. Federal Reserve, unless they are super aggressive in raising interest rates, which by their words and deeds they will not be… the ECB will be unable to raise rates high enough and fast enough to fight inflation.