In line with expectations, producer price inflation accelerated to +0.6% y/y in June, from +0.1% y/y in May.
 
The higher PPI reading was mainly due to a less deflationary fuel component, i.e.‘coke, petroleum & chemical products’ reading in June (-4.7% y/y from -6.4% y/y in May). Additionally, an acceleration in ‘food’ (+3.6% y/y from +3.0% y/y), driven in turn by higher meat prices amidst the ongoing foot and mouth disease, added to the headline reading.

Despite the uptick in the latest print, producer inflation remains very low. However, the PPI print, along with a higher CPI reading for June, confirms that inflationary pressures are rising. In the absence of inflationary shocks, increases in the PPI and CPI should be gradual.