European Prices Leap 7.1 Percent

By Fergal O'Brien  |   2008-7-3  |     NEWSPAPER EDITION

EUROPEAN producer prices jumped a record 7.1 percent in May as energy and food costs surged, adding to the European Central Bank's concerns that faster inflation will become embedded in the economy.

The annual increase in factory-gate prices in the euro region was the biggest since the series began in 1990 and followed a 6.2-percent gain in April, the European Union statistics office in Luxembourg said yesterday. The May increase exceeded the 6.7-percent median forecast of 27 economists in a Bloomberg News survey.

Soaring food and energy costs are boosting expenses for companies, prompting them to pass on price increases to consumers and push up inflation in the 15 nations that use the euro. The ECB has signaled it may increase its benchmark interest rate tomorrow to 4.25 percent, which would be the highest in seven years, to curb consumer price growth.

Energy price inflation accelerated to 18.2 percent in May, the highest in two years. Crude oil rose to near US$144 a barrel this week.