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Energy Costs Pull Down Euro Zone Producer Prices in May

Sean Gallup | Getty Images

Euro zone producer prices fell by slightly more than expected in May and for the third straight month, data showed on Tuesday, reflecting the bloc's stagnant economy and giving the European Central Bank scope to keep rates at a record low.

Factory prices in the 17 countries using the euro fell 0.3 percent in May, the EU's statistics office Eurostat said.

That compared to the 0.2 percent drop forecast by a Reuters poll of economists, although the May reading was narrower than the 0.6 percent drop in April.

(Read More: Euro Zone June Manufacturing PMI Rises to 16-Month High of 48.8)

Energy prices fell 0.8 percent in May, the biggest drop in Eurostat's index.

From the same month a year ago, prices slipped 0.1 percent.

Producer prices, which help anticipate rises or falls in consumer prices, underline the weak inflationary pressures in that have allowed the ECB to cut interest rates to a record 0.50 percent to try to revive lending and help the economy.

Economists expect both consumer and factory inflation to remain low for the rest of this year, despite a slight rise in consumer price inflation in June.

(Read More: The 'Goldilocks' Mentality Is Ruling the Stock Market)

However, signs of improvement at European factories may stop the bank from cutting rates again on Thursday when the ECB's Governing Council meets to discuss monetary policy.

The ECB said last week it will keep its accommodative monetary policy stance to help a gradual economic recovery that is expected to start in the second half of this year.

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