Today at 10.00 UK Time, the European statistics office Eurostat will release Producer Price Index (PPI) figures for June. Christophe Barraud, recognized as one of the “Top Forecaster” by Bloomberg, suggests it could surprise downward, contracting for a sixth straight month. On a YoY basis, Eurozone PPI should decline at the fastest pace since June 2020.
On a YoY basis, PPI already decelerated sharply from +43.4% in August 2022 to -1.5% in May 2023. This sharp move mainly reflects a drop in energy costs (-5.0% in May). This trend is likely to gain traction in June as oil and power prices kept normalizing while base effects remain negative.
According to Barraud, regional data already revealed several countries experienced a sharp pullback in June with PPI contracting by 12.4% in Belgium, 8.2% in Italy and 8.1% in Spain. As a result, Eurozone PPI YoY should contract at the fastest pace since June 2020.
Producer prices are an early indication of trends in consumer inflation, which the ECB wants to keep at 2.0% over the medium term, but which stood at 5.3% in July. A decline of PPI YoY would likely reinforce the idea that Eurozone CPI could further normalize donwward in the coming months.
