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Cooler than expected ! The Eurozone PPI annual rate recorded -1.5 percent in May 2023, turning negative for the first time since 2021

July 07, 2023

Eurozone PPI data cooled sharply again. Eurozone PPI fell 1.9 percent month-on-month and 1.5 percent year-on-year in May, both falling faster than expected. On July 5th, Eurostat data showed that PPI in the euro area is -1.9% in May, expected -1.8%, the previous value -3.20%. Euro zone PPI y/y in May -1.5% vs. -1.30% vs. 1.00%. It is worth noting that the PPI annual rate was last in negative territory in February 2021.

From the perspective of subdivision, the main reason for the decline in PPI data is the decline in energy prices. Compared to April 2023, the May 2023 PPI fell 5.0% in the energy sector, fell 0.1% in consumer non-durables, capital goods prices remained stable, and consumer durables rise 0.3%. Excluding energy, total industrial prices fell 0.4 percent. In the EU, industrial producer prices in the energy sector fell 5.0%, non-durable consumer prices fell 0.2%, and durable consumer prices rise 0.2%. Total industrial prices, excluding energy, fell 0.5 percent.

Compared to May 2022, industrial producer prices in the euro area in May 2023 were 13.3% lower in the energy sector, 6.7% higher in consumer durables and 9.6% higher in non-durable consumer goods. Excluding energy, total industrial prices rise 3.4 percent. In the EU, industrial producer prices in the energy sector fell by 10.4%, consumer durables rise by 6.5%, and non-consumer durables rise by 9.8%. Total industrial prices, excluding energy, rise 3.5 percent.

Despite PPI cooling more than expected, signs of deflation have appeared, but the European Central Bank President Christine Lagarde believes that the European economy is currently only in stagnation, did not enter a real recession, but also need to continue to tighten monetary policy.