Euro area industrial producer prices fell sharply by 2.2 percent month-over-month in April 2025, marking an acceleration from March's 1.7 percent revised decline and signalling sustained downward pressure in the industrial sector. This monthly drop was driven almost entirely by a steep 7.7 percent fall in energy prices, which masked marginal gains in other segments such as durable (0.1 percent) and non-durable consumer goods (0.3 percent). Prices for capital goods remained flat, reflecting stable investment-related production costs, while intermediate goods slipped slightly (minus 0.1 percent).

Despite the monthly decline, annual figures show modest resilience, with industrial producer prices up 0.7 percent year-over-year. Excluding volatile energy prices, prices in total industry rose by 1.1 percent, indicating that underlying inflationary pressures remain steady. Notably, non-durable consumer goods (1.8 percent) and capital goods (1.6 percent) led annual growth, highlighting robust demand in essential and investment-related segments.

The latest updates point to a bifurcated industrial landscape: while headline figures suggest deflationary trends due to falling energy costs, core industrial price growth remains positive. This divergence may offer temporary relief for businesses reliant on energy-intensive processes, but also reflects ongoing structural adjustments within the euro area's industrial 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.