Eurozone's producer prices rose by 0.4 per cent month-on-month and 1.8 per cent year-on-year in the month of July according to Eurostat, the European Union's official statistics office.

Analysts were expecting slower price acceleration of 0.2% month-on-month and1.6% year-on-year. June's monthly and annual change was -0.5% and +1.8%, respectively.

On a monthly basis, producer prices rose 0.9% for industrial goods excluding construction and energy, 0.0% for intermediary goods, 4.8% for energy, 1.0% for capital goods, 1.9% for durable consumer goods, and 2.1% for non-durable consumer goods.

The highest annual producer price increases were in Greece (4.1% vs. previous 3.1%) and Portugal (3.0% vs. previous 2.7%). Producer prices in Germany rose by 0.9% (vs. previous 1.6%), by 2.4% in Italy (vs. 2.2%), and by 2.6% in Spain (vs. 2.5%).

"Cost inflation shows signs of moderating over recent months. However, the recent increase in energy prices will place some upside pressure in coming months," said analysts at Digital Look.

"The European Central Bank may be relatively aggressive with monetary policy because inflation from the cost side nor the demand side are not the problem. The real issue is the economic slowdown."

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