Industrial producer prices in the euro area showed a mild easing in September 2025, falling by 0.1 percent from August, although this represents a softer decline than the revised 0.4 percent recorded in the previous month. The overall movement reflects weaker price pressures in energy, which fell by 0.2 percent, while intermediate and capital goods remained broadly unchanged. Consumer-related categories demonstrated modest resilience, with durable goods increasing by 0.3 percent and non-durable goods rising by 0.1 percent, suggesting steady household demand despite wider industrial easing.

On an annual basis, producer prices decreased by 0.2 percent, driven largely by a substantial 2.4 percent fall in energy costs, reflecting easing global commodity pressures. Capital goods and both consumer goods categories recorded healthy annual increases between 1.6 percent and 1.9 percent, pointing to ongoing investment in machinery and sustained consumption patterns. Importantly, industry excluding energy rose by 0.9 percent over the year, signalling underlying stability across core manufacturing segments.

The latest update suggests energy-dependent sectors continue to weaken due to lower input costs, while consumer and capital goods maintain moderate growth. This trend supports a gradual normalisation of price pressures, potentially easing concerns related to production cost inflation within the euro area.

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.