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Producer prices slide in Europe

July 3, 2012 at 1:40 PM

BRUSSELS, July 3 (UPI) -- Producer prices in the European Union and eurozone excluding construction dropped in May after falling flat in April, the region's data office, said Tuesday.

Dropping prices in a slow economy could raise alarms for policy makers who would worry deflation could set in.

With prices falling, spenders, both consumers and businesses, tend to wait to make purchases, as prices are expected to be more favorable if they wait. But the waiting works against the economy, slowing it down further.

Prices received by producers in May compared with April fell 0.5 percent in the 17-member eurozone and 0.7 percent in the 27-member European Union, Eurostat said.

Compared to May 2011, prices have risen 2.3 percent in the eurozone and 2.4 percent in the EU.

The 12-month comparison, which provides a longer view of where prices are going, has dropped sharply. Prices in March were 3.5 percent higher than March 2011 in the eurozone and 3.9 percent higher in the EU. In April, the annual gains had dropped to 2.6 percent in the eurozone and 2.8 percent in the EU.

In May, energy prices fell 1.4 percent in the eurozone month-to-month and 2.3 percent in the EU, the report said.

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