Brussels, Belgium (4E) – Factory gate prices in the euro zone dropped for the fifth consecutive month in May, suggesting that the common currency bloc could soon face low inflation that may slow its recovery.
Producer prices dropped 0.1 percent from April, and 1 percent from May 2013, according to the European Union’s statistics agency report released Wednesday.
The continuing drop in producer prices indicates that consumer prices in the coming months are not likely to increase rapidly. The annual rate of inflation stayed flat at 0.5 percent in June, well below the 2 percent target set by the European Central Bank (ECB), Eurostat said.
ECB officials responded to weak growth and low inflation by providing additional stimulus at their June meeting and said it will increase the stimulus if the euro area’s economic prospects did not improve soon.
The governing council of the ECB meets Thursday, and observers do not expect the bank to announce any fresh measures.