Oil prices begin hitting Europe’s fortunes as inflation goes up

 
Tim Wallace
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RISING energy prices started to hit firms in the Eurozone in February, official data revealed yesterday, increasing fears that higher oil prices will soon affect consumers and the wider economy.

Producer prices climbed 0.6 per cent in the month, taking the annual rise to 3.6 per cent, Eurostat figures showed, compared with a 0.8 per cent increase in January.

Prices in the energy sector jumped 1.2 per cent in February, compared with a 0.2 per cent rise in the price of capital goods and 0.3 per cent for consumer goods. Energy prices were also up by 2.3 per cent in January.

“These data fuel concern that higher oil prices will lead to consumer price inflation being sticky over the coming months – this would be bad news for consumers’ purchasing power and Eurozone growth prospects,” said IHS Global Insight economist Howard Archer.

Furthermore, “rising producer prices reinforce belief that the ECB is unlikely to cut interest rates further even though there are worrying signs that Eurozone economic activity is faltering”.