Europe producer prices fall

Bloomberg

Prices of goods leaving euro-area factories plunged 1.9 percent from the previous month, the sharpest decline since the data were first compiled in 1981, the European Union statistics office in Luxembourg said yesterday. Annual price growth eased to 3.3 percent in November from 6.3 percent in October.

A two-thirds drop in oil prices from a July peak is slowing inflation and giving the ECB leeway to cut interest rates further as policy makers seek to limit the economic damage from the global credit crisis. The ECB already has lowered its key rate by 175 basis points since early October to 2.5 percent and another reduction may come next week.

"Inflation trends are very favorable at the moment," said Nick Kounis, chief European economist at Fortis in Amsterdam. "They give the ECB much more room for maneuver in terms of cutting interest rates."Energy prices dropped 5.1 percent in November from October, yesterday’s report showed, the biggest fall since the data series was first reported separately in 1985. Crude oil reached a record $147.27 a barrel in July, pushing producer-price inflation to an 18-year high that month. In November, oil prices dropped 20 percent as global demand weakened and Europe endured a recession.