European Union Industry Selling Price Expectations

Since May 2003, the European Commission has been collecting direct quantitative information on entrepreneurs' perceptions and expectations of inflation in the Euro zone, in the European Union (EU) and in the accession countries through its business survey. It is about entrepreneurs' views on inflation, which are relevant for policy purposes, in particular because they are readily available and provide information on the expectations of economic agents.

The normal producer price index (also called PPI) measures only the current inflation of producer prices, not future ones. Although the data of subjective estimates of more than 100,000 firms are biased, this error can to some extent be corrected mathematically, making survey data indispensable for economic surveillance in the EU and for monitoring the economic prospects of Economic and Monetary Union and the economic development of the candidate countries. They are used for the half-yearly economic forecasts and for the analysis of cyclical developments (e.g. identification of turning points) and by several different Commission services, including the ECB and the OECD.

Surveys are collected in the first half of the month and published on the last day of the month. The possible answers to the two questions on current and expected price developments are limited to 6 answers: strong, moderate or slightly rising, steady, falling or do not know.

The impact of the published figures depends heavily on the current economic environment. Inflation that is too high could induce the ECB to raise interest rates, which in turn could lead to a rise in the currency. In difficult economic times, however, rising inflation could deepen a recession even further, which would depress the currency.