(Adds economist comment)
By Jan Strupczewski
BRUSSELS, June 2 (Reuters) - Euro zone producer prices rose more than expected in April driven mainly by more expensive energy, but low growth of consumer goods prices suggested the underlying price pressures remained muted.
The European Union's statistics office Eurostat said prices at factory gates in the 16 countries using the euro rose 0.9 percent month-on-month for a 2.8 percent yar-on-year increase.
Economists polled by Reuters had expected a 0.7 percent monthly gain and a 2.5 percent annual rise.
Producer prices play an important role for rate-setters as a precursor to consumer price developments. The European Central Bank wants to keep consumer inflation below, but close to 2 percent over the medium term.
Euro zone consumer inflation was 1.6 percent year-on-year in May, Eurostat estimated on Monday.
"While the ECB will note the rise in intermediate producer prices in April, the data overall is unlikely to fundamentally alter the bank's view that euro zone consumer price inflation will remain subdued over the two-year policy horizon," said Howard Archer, economist at IHS Global Insight.
"It looks increasingly likely that the ECB will keep interest rates down at 1.00 percent not only through 2010 but deep into 2011. Inflation continues to be pushed up primarily by higher energy prices while underlying price pressures still appear muted," he said.
Without volatile energy and construction prices, or what some economists call core producer price inflation, prices rose only 0.5 percent month-on-month and 1.0 percent year-on-year.
Eurostat said energy prices jumped 1.9 percent on the month and 7.7 percent year-on-year while intermediate goods prices rose 1.3 percent month-on-month and 2.7 percent in annual terms.
But prices of durable and non-durable consumer goods rose only 0.1 percent on the month and non-durable consumer goods, which means mainly food, even fell 0.4 percent year-on-year.
"Prices for capital goods, durable consumer goods and non-durable goods all remained muted in April suggesting that price pressures are still being absorbed as they move up the supply chain," said Archer.
"Still muted consumer spending across the euro zone suggests that the rise in producer prices will be largely absorbed by retailers," he said. (Reporting by Jan Strupczewski, editing by Toby Chopra)