Cheap energy pulls down euro zone producer prices more than expected

BRUSSELS (Reuters) - A steep fall in the prices of energy pulled down producer prices more than expected in December, data showed on Tuesday, setting the scene for more consumer price falls in the coming months.

The European Union's statistics office said that producer prices in the 18 countries that shared the euro in December 2014 fell 1.0 percent month-on-month for a 2.7 percent year-on-year decline.

Economists polled by Reuters had expected a 0.7 percent monthly and a 2.5 percent annual fall.

Eurostat data showed that an 8.3 percent year-on-year plunge of energy prices had the biggest impact on the overall result. Durable consumer goods and capital goods, however, were 1.3 percent and 0.6 percent more expensive than a year earlier.

Producer prices signal early inflationary trends, because unless their changes are offset by retailers, they have a direct impact on prices of consumer goods, which fell by 0.2 percent year-on-year in December and by 0.6 percent in January.

The European Central Bank wants to keep consumer price inflation below, but close to 2 percent.

Having cut interest rates to almost zero, the bank announced at the end of January that it would start buying government bonds to inject more cash into the economy and trigger faster price rises to avoid deflation.

(Reporting By Jan Strupczewski; editing by Philip Blenkinsop)