October producer prices rose a monthly 0.4 percent, just 0.1 percentage point above the consensus and reversing only part of an unrevised 0.6 percent decline in September. The increase was driven primarily by a 1.4 percent spurt in energy prices although durable and non-durable consumer goods recorded gains of 0.3 percent and 0.2 percent respectively. With intermediate goods down 0.1 percent and capital goods unchanged, core prices were just flat and have risen only once in the last three months.

On an annual basis, overall prices fell by 3.2 percent compared to October 2023, largely reflecting an 11.2 percent decrease in energy prices. Excluding energy, the rate was 0.8 percent, up from 0.6 percent in September but still relatively subdued.

Today's data show underlying pipeline price pressures in manufacturing still weak enough to be of no real concern for the ECB ahead of next week's policy announcement. The update lifts the Eurozone RPI to 6 and the RPI-P to 17, showing economic activity in general running slightly ahead of market expectations.

PPI is expected up 0.3 percent on the month and down 3.4 percent from a year ago.

The Producer Prices Index (PPI) measures the gross trading price of industrial goods sold into the domestic market. Changes in the index provide a guide to inflation from the point of view of the product's producer/manufacturer and, in contrast to the consumer price index (CPI), excludes VAT and other deductible taxed associated with turnover. The PPI covers manufacturing, mining and quarrying and utilities but excludes construction. The headline index can be very volatile so financial markets look at a core index to better understand underlying trends. This excludes the often highly erratic energy subsector.

The PPI measures prices at the producer level before they are passed along to consumers. Since the producer price index measures prices of consumer goods and capital equipment, a portion of the inflation at the producer level gets passed through to the HICP. By tracking price pressures in the pipeline, investors can anticipate inflationary consequences in coming months.

Like the HICP, Eurostat's producer price index is also harmonized across the EMU and the larger EU membership. Producer price indexes provide another layer of information on inflation and can be an early warning of inflationary pressures building in the economy. They also record the evolution of prices over longer periods of time. The PPI reports on input prices or commodity prices and can tell whether producers are able to pass through increases in costs to their customers.

The PPI is considered a precursor of both consumer price inflation and profits. If the prices paid to manufacturers increase, businesses are faced with either charging higher prices or taking a cut in profits. The ability to pass along price increases depends on the strength and competitiveness of the marketplace.

Producer prices are more volatile than consumer prices. The CPI includes services components which are more stable than goods, while the PPI does not. Commodity prices react more quickly to supply and demand. Volatility is higher earlier in the production chain. Partly because of this, financial markets will look to the core (ex-energy) index to provide a better guide to underlying trends.