Month-over-month, industrial producer prices in the euro area showed prices rising by 1.6 percent, driven largely by a significant 5.4 percent increase in energy costs. In contrast, prices for intermediate goods declined by 0.1 percent, while durable consumer goods fell by 0.2 percent. Capital and non-durable consumer goods prices remained stable, underscoring the stabilising effect of non-energy components. Excluding energy, prices in total industry showed no movement, highlighting the outsized impact of energy on overall trends.

Annually, the picture shifts. Compared with November 2023, industrial producer prices in the euro area declined by 1.2 percent, driven by a sharp 5.3 percent drop in energy prices. This long-term energy cost reduction contrasts starkly with the monthly increase, suggesting volatility in energy markets. Intermediate goods also saw a slight annual decline of 0.3 percent. However, prices for capital goods, durable consumer goods, and non-durable consumer goods increased by 1.3 percent, 0.6 percent, and 1.9 percent, respectively, reflecting resilience in consumer-focused sectors. Excluding energy, total industry prices rose by 0.9 percent, highlighting steady underlying growth despite external pressures.

These movements signal potential implications for inflation trends and economic policy adjustments as the bloc navigates an evolving industrial landscape. The latest update takes the RPI to minus 5 and the RPI-P to minus 18. This means that economic activities, in general, are slightly behind market expectations.

PPI is expected at minus 2.5 percent in November versus minus 3.2 percent in October.

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.