BRUSSELS: A rise in energy costs pushed euro zone producer prices up for the first time this year in June, data showed on Monday, providing some breathing space for the European Central Bank which is troubled by persistently low inflation. Prices at factory gates in the 18 countries sharing the single currency rose 0.1 percent in June from May mainly because of a 0.5 percent increase in costs of energy, the EU's statistics office Eurostat said. Analysts polled by Reuters had expected prices to be flat on the month. Compared with the same period of the last year, producer prices fell 0.8 percent against market expectations of a 1.0 percent drop, showing its highest year-on-year reading since December 2013. Producer prices are an indication of inflationary pressures early in the pipeline because, unless absorbed by retailers, they translate into consumer inflation, which the European Central Bank wants to keep below, but close to 2 percent. In June, the bloc's five largest economies registered no monthly drop for the first time this year. Prices in Spain rose 0.9 percent for the second month in a row, followed by the Netherlands 0.3 percent increase and 0.1 rise in Italy. Prices at the factory gates in Germany and France were flat in June when compared with May. Adjusted for energy, producer prices rose 0.1 on the month in June after being flat in May and were down 0.1 percent year-on-year in June, following a 0.2 percent drop in May. A slowdown in euro zone inflation to 0.4 percent in July, combined with the ongoing crisis in Ukraine, will give ECB policymakers plenty to chew on when they meet on Thursday but no action is expected after the June's policy-easing package. The 9.6 trillion euro ($12.9 trillion) economy is just above deflationary territory. However, policymakers are concerned that if inflation is persistently low, then people start to lower their price expectations, demand fades and the economy sinks into a quagmire of deflation.

Source