Italy's data shows CPI at 2004 high on oil cost

Italian inflation jumped in June, bolstered by energy costs, hitting its highest level this year after 13 cities from Milan to Bari on Monday reported consumer price figures above economists' forecasts.
Annual inflation in the eurozone's third-largest economy rose 2.5 percent, economists said, compared with rises of 2.3 percent in the previous four months. The month-on-month inflation rate rose to 0.2-0.3 percent from 0.2 percent in May.
Economists blamed energy prices, also seen as the culprit last month as eurozone inflation hit its fastest annual rate in over two years.
"At first sight it seems that the only pressure is coming from the price of oil," said Vicenzo Guzzo, an economist at Morgan Stanley.
The acceleration in Italy contrasted with Germany, whose annual inflation rate eased in June to 1.8 percent as the cost of oil fell.
Energy costs in Italy tend to feed through into prices more slowly than elsewhere, in part because taxes comprise a higher percentage of the total price for fuel. But once incorporated in prices, they are more persistent.
Italian prices had been seen up 0.2 percent month-on-month and 2.4 percent in annual terms, according to a Reuters poll.
"It's slightly to the upside but Germany surprised on the downside," said Raj Gunaratna, at economist at 4CAST in London. "In terms of the ECB outlook I don't think there's going to be any huge shift either way."
The European Central Bank has been arguing that inflation pressures will subside over the next few months and is not expected to follow US and UK central banks in expected rate-boosting moves until next year, strategists forecast last week in a Reuters poll.
Earlier on Monday, statistics agency Istat reported May producer prices, a gauge of future inflation, posted a 2.9 percent increase, above expectations, and their biggest rise since May 2001.
"Oil prices should continue to push production prices higher in June after the strong rise we saw in May," Guzzo said. "But consumer prices should stop suffering from energy prices quite as much from July onwards".