German official producer prices gain 1.0 pct in April

20th May 2011, Comments 0 comments

German producer prices, the cost of goods at the factory gate, gained a monthly 1.0 percent in April, a sharp increase from the March rate of 0.4 percent, official data showed on Friday.

Rising inflation pressure in the biggest eurozone economy is expected to underpin increases in the European Central Bank's (ECB) headline interest rate in the coming months.

The German national statistics office also said its producer price index had gained 6.4 percent on a 12-month basis in April, compared with 6.2 percent the previous month.

The index is expected to remain at a high level owing to strong increases in the cost of commodities and other raw materials.

While they have not substantially curbed German economic activity, which expanded by a strong 1.5 percent in the first quarter from the last three months of 2010, price increases could start to affect core inflation.

"They are feeding into consumer prices which threatens to undermine inherently fragile household spending," Moody's analyst Kirsten Knight noted.

Eurozone inflation hit 2.8 percent in April, the highest level in 20 months and well above the ECB's target of just below 2.0 percent.

The central bank raised its main lending rate to 1.25 percent in April, and is expected to unveil another hike in June or July despite debt problems in countries like Greece, Ireland and Portugal.

© 2011 AFP

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