Industrial producer prices in the euro area softened in August 2025, falling 0.3 percent from July, reversing the 0.3 percent revised rise seen the previous month. The decline was largely driven by a sharp 1.3 percent monthly drop in energy prices, reflecting ongoing volatility in the sector. Other categories were broadly stable, with slight gains in capital goods and non-durable consumer goods (0.1 percent each) offset by slight declines in intermediates and durable goods (minus 0.1 percent each). Excluding energy, prices across the industry held steady, signalling underlying stability beneath energy-driven swings.

On an annual basis, producer prices were down 0.6 percent compared with August 2024, pulled lower by a steep 4.1 percent decline in energy costs. However, other categories showed resilience, with capital goods (1.8 percent), non-durable consumer goods (2.0 percent), and durable goods (1.6 percent) all recording solid increases. Intermediate goods slipped slightly (minus 0.3 percent), while prices excluding energy rose by 1.0 percent, highlighting that inflationary pressures persist outside the energy sector.

In summary, the data reveals that energy remains the key drag on industrial prices, masking steady gains in other segments. This suggests a more balanced pricing environment, but with continued reliance on energy trends to shape the overall trajectory of euro area producer prices. This latest update takes the RPI to minus 1 and the RPI-P to 9, meaning that economic activities are now within the expectations of the bloc.

Wholesale prices are seen up 0.4 percent on the month and up 0.1 percent on year.

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.