The rising cost of oil drove euro zone factory prices up by more than expected in February despite the stumbling economy, adding to a chorus of data suggesting the European Central Bank will keep interest rates at 1 percent on Wednesday. Prices at factory gates in the 17 countries using the euro rose 0.6 percent in the month from January for a 3.6 percent year-on-year rise, the European Union's statistics office Eurostat said on Tuesday.
Economists in a Reuters poll forecast a 0.5 percent rise, while Eurostat also revised up January's reading by a 10 basis points to show an 0.8 percent increase in the month. With the indebted currency area heading into its second recession in three years, expectations that rising unemployment and an impending recession in many economies would bring down prices are being complicated by high world crude prices.
Brent crude rose around 14 percent in the first three months of 2012 on concerns that sanctions by the West targeting Iran's nuclear ambitions could lead to a supply disruption. The recovering US economy is also underpining demand. Energy prices at factories in the euro zone rose by 1.2 percent in February after rising 2.3 percent in January, signalling that the rise in overall industrial producer prices could translate into higher prices for consumers.
Consumer prices slid 10 basis points to 2.6 percent in March from February, down from last year's 3 percent peak, but have resisted a bigger fall given the economic downturn. The ECB is expected to hold interest rates at 1 percent at its monthly meeting on Wednesday.
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