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Euro zone producer prices fall m/m in March

FILE PHOTO: A woman carries plastic bags with fruits and vegetables at a fruit store in Ronda

BRUSSELS (Reuters) - Euro zone producer prices fell a bit more than expected month-on-month in March, data showed on Thursday, pointing to a further slowdown in consumer prices as the European Central Bank is expected to announce yet another interest rate rise.

The European Union's statistics office Eurostat said prices at factory gates in the 20 countries sharing the euro fell 1.6% in March against February and grew 5.9% year-on-year, decelerating sharply form 13.3% annual growth in February.

Economists polled by Reuters had expected a monthly fall of 1.7% and a 5.9% year-on-year rise.

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 still stood at 7.0% in April. The ECB has been raising rates since the middle of 2022.

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The bank is set to announce another interest rate rise later on Thursday, increasing borrowing costs to 3.75 or even 4.0% to fight the persistently high inflation.

Eurostat said the monthly fall in producer prices was mainly thanks to a 4.8% drop in energy costs and a 0.4% easing in prices of intermediate goods.

Falling energy prices were also keeping the year-on-year reading down, because without energy, producer prices were 8.0% higher than a year earlier, mainly because of a 13.4% increase in non-durable consumer products, such as food. Durable consumer products, however, were also boosting the overall index, rising 8.2% year-on-year in March.

(Reporting by Jan Strupczewski)