Industrial producer prices in the euro area increased by 0.8 percent monthly in January 2025, reflecting continued inflationary pressures across key industrial sectors. Compared to January 2024, prices rose by 1.8 percent.

Energy costs played a significant role in price dynamics, with a 1.7 percent monthly increase and a 3.5 percent annual rise, making it the most significant contributor to overall inflation. Other industrial groupings experienced moderate price growth, with capital goods up by 0.7 percent monthly and 1.6 percent annually. In comparison, durable and nondurable consumer goods saw steady gains of 0.6 percent and 0.2 percent monthly and 1.5 percent and 1.8 percent annually, respectively. Intermediate goods exhibited the slowest growth, up by only 0.3 percent monthly and 0.5 percent annually, suggesting stabilisation in supply chain costs.

Excluding energy, total industrial producer prices rose 0.4 percent month-over-month and 1.3 percent year-over-year, indicating broader but controlled inflationary pressures across industries. The continued rise in input costs, particularly in energy, signals potential challenges for manufacturers and policymakers, with implications for pricing strategies, competitiveness, and overall economic stability in the euro area. The latest update leaves the RPI at 24 and the RPI-P at 30. This means that economic activities are well ahead of the expectations in the Euro Area economy.

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.