Producer prices fall in eurozone

ECB is widely expected to cut its key interest rate to 2.75% from 3.25%

Eurozone producer prices fell 0.8% during October, raising hopes for an interest rate cut by the European Central Bank (ECB) on Thursday.

The bigger-than-expected drop was led by falling energy prices, which declined by 2%, the European Union's statistics office said.

Prices at factory gates are generally seen as an advance signal of inflationary trends in consumer prices.

The ECB is widely expected to cut its key rate to at least 2.75% from 3.25%.

'Retreating sharply'

"The message for the ECB is clearly: don't worry about inflation, cut now, and a lot," said Holger Schmieding at Bank of America.

The bank cut rates twice by 0.5 percentage points, in October and November, to try and boost the eurozone economy, which has entered recession after two quarters of negative economic growth.

The ECB has an informal target of keeping inflation in the eurozone below 2%.

Consumer prices rose at an annual rate of 2.1% in November, significantly slower than a 3.2% rise in October.

"The October producer price inflation add to the now substantial evidence that inflationary pressures in the eurozone are retreating sharply," said Howard Archer, chief European economist at IHS Global Insight.

Spain's woes

Meanwhile, Spain's jobless data released on Tuesday also suggested the eurozone economy may need a boost from the ECB.

The number of people registering as unemployed in Spain rose 171,000 to 2.99 million in November.

The Spanish unemployment rate went up for the eighth month in a row and, according to an EU estimate, stood at 12.8% in October, the highest level in the European Union.

According to the Spanish Labour Ministry, the number of people registering as unemployed in Spain has gone up by almost 900,000, or 43%, in the past 12 months.