Industrial Producer Prices Fall in Euro Area and EU

Eurostat has revealed that industrial producer prices for April in the euro area and across the European Union (EU), has declined by 0.3% and 0.2% respectively.

These are disappointing figures as in March prices grew by 0.3% in the euro zone, and by 0.4% in the EU.

Year on year, industrial producer prices decreased by 4.4% in the euro area, and by 4.2% in the EU.

For the European Central Bank, the latest prices do not make good reading for their fight against deflation, currently at minus 0.1% in the euro area.

Falls in energy and non durable consumer goods by 1.1% and 0.1% respectively, are the main reasons for the reduction in prices.

Although in contrast, there was a rise in intermediate goods by 0.2%, and capital and durable consumer goods by 0.1%.

In the EU, there was a reduction in energy prices by 0.5%, and 0.1% for non durable consumer goods. Prices in total industry excluding energy increased by 0.1%.

The largest decreases in industrial producer prices were in Croatia on minus 1.5%, Sweden minus 1%, with Belgium, Estonia and Italy all falling by 0.9%.

Whereas, the highest increases were found in Ireland 1.3%, the United Kingdom 0.6%, and Denmark 0.5%.

UK Construction Slowdown Continues 

The latest Purchasing Manager’s Index (PMI), produced by Markit and the Chartered Institute of Procurement and Supply, has revealed that the UK’s construction industry has fallen into further decline.

The index score for May was 51.2, down from the 52 figure for April, although still above the 50 neutral mark, the latest reading was the weakest rise in business activity for three years.

Respondents in the survey, mainly blamed the lack of new construction projects, alongside EU referendum uncertainty, and a general slowdown in market conditions.

Residential business work increased at one of the slowest rates recorded since the early part of 2013, while growth of commercial activity was the slowest for nearly three years.

The civil engineering sector was stagnant, which made in the worst performing sub category for the second month running.

Purchasing activity also slowed down as the amount of fresh projects diminished, although job creation was maintained, which marked three years of continual job creation in the industry.

Pound Continues to Slide Amid ‘Brexit’ Fears 

Increasing uncertainly over the outcome of the UK’s referendum on membership of the EU, has resulted in further falls for the pound.

Over the past 24 hours, the GBP/USD exchange rate has seen the pound fall from buying $1.45 to below $1.44 yesterday evening.

So far this morning GMT, the pound has only recovered slightly to purchasing $1.442.

Recent polls have seen the leave campaign jump ahead of the remain camp, with the two most latest polls conducted by ICM, placing the leave vote two and three points clear.

Societe Generale in the daily forex review, said that with the vote three weeks away, one month volatility has spiked, and risk-reversals have moved sharply in favour of downward pressures of sterling.

The post vote economic outlook meanwhile is for more monetary policy divergence relative to the United States.