In May 2025, euro area industrial producer prices slipped by 0.6 percent compared to April. While this marked a smaller monthly drop than April's 2.2 percent, the trend underscores ongoing price moderation across the industrial sector, primarily driven by a significant 2.1 percent decline in energy prices. However, producer prices excluding energy inched up by 0.1 percent, suggesting underlying stability.

Month-over-month, intermediate goods fell slightly (minus 0.1 percent), capital goods remained unchanged, and both durable (0.3 percent) and non-durable consumer goods (0.2 percent) posted modest gains. This signals that while energy volatility weighs heavily, consumer-oriented sectors are showing some pricing resilience. Regionally, the national PPI rose on the month in Germany (-0.2 percent after -0.7 percent), Italy (minus 0.7 percent after minus 3.0 percent), Spain (-0.7 percent after -3.1 percent) and France (-0.8 percent after minus 4.2 percent).

Year-over-year, producer prices in the euro area rose by a subdued 0.3 percent. The 1.4 percent drop in energy prices over the year offset broader gains in capital goods (1.6 percent), durable goods (1.4 percent), and non-durable goods (1.9 percent). Excluding energy, industrial prices rose 1.1 percent year-over-year.

The latest updates suggest a cooling inflationary environment within the industrial sector, with energy disinflation leading the way. Yet, stable or rising prices in consumer and capital goods indicate that demand and supply dynamics remain supportive in other areas of the 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.