Euro zone factory prices rise at slower rate in September

BRUSSELS Tue Nov 6, 2012 5:01am EST

BRUSSELS (Reuters) - Euro zone factory prices rose by the smallest margin in three months in September as the cost of energy fell, although the European Central Bank is not seen cutting interest rates on Thursday.

Prices at factory gates in the 17 countries using the euro rose 0.2 percent in September from August, the EU's statistics office Eurostat said on Tuesday, as expected by economists polled by Reuters.

The producer price index was up 2.7 percent in September compared to the same month a year ago.

Consumer inflation in the euro zone, which has been well above the ECB's target of just below 2 percent for more than a year, was 2.5 percent in October compared with the same month a year ago, down from 2.6 percent in September.

ECB policymakers last met on October 4 and kept interest rates at a record low of 0.75 percent and are expected to keep rates unchanged again this week, with investors looking instead for further details of the bank's new bond-buying programme and its reading of the weak euro zone economy.

"Some things have improved in the last two or three months, but I think the road ahead is still long and it's uphill," ECB President Mario Draghi said of the economy last month.

Cutting interest rates again would lessen the cost of borrowing for euro zone households and companies struggling with the bloc's second recession since the 2008/2009 global financial crisis. But economists say the impact of a cut would be modest at best, because commercial banks are reluctant to lend, especially in poorer, indebted euro zone countries.

Still, the ECB will likely take heart from the September producer prices that show no rise in the price of energy compared to August. High oil prices at a time of recession have made life even harder for companies trying to keep down costs.

Brent crude traded below $108 a barrel on Tuesday, down from prices near $120 a barrel in August. Tensions between Iran and the West over Tehran's nuclear ambitions have persisted and driven crude higher despite weak global demand for energy.

For further details of Eurostat data click on: here (Reporting by Robin Emmott; editing by Rex Merrifield)

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