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Internal Market, Industry, Entrepreneurship and SMEs

Decomposing producer price inflation in the euro area – quarterly update

Updated every quarter, this indicator provides a measure of the relative importance of supply and demand factors in determining the inflationary pressure in the euro area.

Key messages of this edition

  • in the last quarter of 2022, producer price inflation in industry is starting to decrease, in the euro area, in line with the data about headline consumer price inflation
  • from 31.6% in 2022 Q3, producer price inflation in industry has decreased  to 21.7%
  • this decrease is driven by disinflationary trends in both demand and supply
  • monetary policy action is likely determining the disinflationary trend of demand factors
  • however, supply chain factors, in particular shortages of equipment and material, continue to play a significant role in driving inflationary pressures
  • the decomposition suggests that the current inflationary pressure continues to be primarily driven by supply shortages (around 85% of the total pressure), with demand boosts accounting for only a small portion (around 15%).