Industrial producer prices in the euro area showed a notable shift in June 2025, rising by 0.8 percent compared to May, reversing the 0.6 percent decline observed in the previous month. This rebound was largely driven by a sharp 3.2 percent monthly increase in energy prices, which offset declines in intermediate goods (minus 0.2 percent) and stagnant growth across most other categories. Excluding energy, prices across the industrial sector edged down slightly by 0.1 percent, reflecting underlying softness in producer costs outside the volatile energy component.

On an annual basis, industrial prices rose by 0.6 percent from June 2024, signalling modest inflationary momentum. Notably, non-durable consumer goods (2.0 percent) and capital goods (1.7 percent) led the year-over-year price increases, suggesting continued demand resilience in key consumption and investment categories. However, intermediate goods and energy prices both declined slightly (minus 0.1 percent), indicating ongoing stabilisation in core production inputs.

The latest updates highlight a fragile price recovery primarily driven by energy volatility, while core industrial pricing remains subdued. With prices excluding energy up just 0.9 percent year-over-year, the broader inflation picture appears muted, offering policymakers some relief as they assess inflation risks amid a still-uncertain economic recovery across the eurozone.

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.