Surge in producer prices in March seen as a sign of big CPI rise over next few months

Producer prices surged in March, spreading fears of higher consumer inflation in the months to come. According to data released yesterday by the National Statistics Service, the annual rate of growth of the producer price index (PPI) accelerated to 4.7 percent in March from 4.1 percent at the end of February. The month-on-month rise was 1.6 percent. In March 2004, the PPI’s annual rate was 2.1 percent. Prices of energy products were the main culprit, rising 14.6 percent year-on-year at the end of March. Intermediate goods rose 3.7 percent, capital goods 2.5 percent and consumer durables 3.1 percent. Producer prices of consumer non-durables actually declined 0.2 percent. Earlier this week, the Bank of Greece forecast that inflation would rise at an average clip of 4 percent this year, up from 2.9 percent in 2004. The government’s own estimate, made by counting on a rather low price for oil, was just 3 percent. Other data published by the NSS yesterday also revealed a slowdown in retail trade. The end-February data showed that retail trade turnover rose 7.5 percent year-on-year versus a rise of 9.9 percent in February 2004. The February data was influenced by a big jump in apparel and footwear sales (20.9 percent), as winter sales in these items took place exclusively in February, instead of in January and February, as was the case until 2004. Turnover at department stores increased 9.4 percent, 7.9 percent in pharmaceuticals and cosmetics, as well as 7.9 percent in off-store sales, 6.5 percent in supermarkets, 5.3 percent in books and paper goods, 2.4 percent in foods, beverages and tobacco and 1.8 percent in furniture and appliances, the NSS reported. The Bank of Greece report points to a deterioration in consumer sentiment in recent months. Consumption, along with Olympic projects, had been the major driver of high growth. According to the central bank, prolonged consumer uneasiness could undermine growth, which is already due to drop to 2.9 percent in 2005 from 4.15 percent in 2004.

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