Industrial producer prices in the euro area edged higher in November 2025, signalling a modest re-acceleration in upstream cost pressures. Month-over-month, prices rose by 0.5 percent, strengthening from the subdued 0.1 percent increase recorded in October. This momentum was largely energy-driven, with energy prices jumping by 1.8 percent, while intermediate and capital goods posted only marginal gains. Excluding energy, total industrial prices increased by just 0.1 percent, indicating that core producer price pressures remain contained.

The annual picture tells a more nuanced story. Producer prices were still 1.7 percent lower than a year earlier, reflecting a sharp 7.4 percent fall in energy prices that continues to exert a strong disinflationary pull. In contrast, non-energy components show persistent cost pressures as capital goods prices rose by 1.8 percent year-over-year, while durable and non-durable consumer goods increased by 2.0 percent and 1.1 percent, respectively. Intermediate goods prices also edged up by 0.4 percent.

Indeed, the data suggest a bifurcated pricing environment. Energy price volatility is driving short-term fluctuations, while steady increases in non-energy goods point to lingering structural cost pressures that could gradually filter through to consumer prices if demand conditions firm.

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.