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BRUSSELS, Nov 4 (Reuters) - Cheaper energy pulled down prices at factory gates in the euro zone in September as expected, data showed on Wednesday, signalling low inflationary pressure despite a nascent economic recovery.
Producer prices in the 16 countries using the euro fell 0.4 percent against August, leaving them 7.7 percent lower than a year earlier, European Union statistics agency Eurostat said.
The data was in line with consensus forecasts by analysts in a Reuters poll.
Cheaper oil was the main reason behind the monthly and annual declines as energy costs fell 1.9 percent against August and 17.6 percent compared with September 2008.
Prices for capital goods, durable consumer goods, non-durable consumer goods all edged down 0.1 percent month-on-month in September.
"This indicates that producers' pricing power remains weak amid substantial excess capacity and intense competition, even though euro zone manufacturing activity has firmed in recent months," said Howard Archer, economist at IHS Global Insight.
Producer prices are important to the European Central Bank because they show inflationary pressure, or the reverse, early in the pipeline.
The ECB, which meets to decide on interest rates on Thursday, wants annual consumer price inflation to be just below 2 percent but it was at -0.1 percent in October, the fifth straight month of falling prices.
"Ongoing muted producer prices reinforces belief that underlying inflationary pressures are still very low in the euro zone," Archer said.
"Consequently, there is a compelling case for the ECB to retain an accommodative stance not only at Thursday's policy meeting but well into 2010, and not to be drawn into any early tightening of monetary policy by currently improving euro zone economic activity," he said.
Economists expect the central bank to keep its main interest rate unchanged at a record low of 1 percent until the third quarter of next year. (Reporting by Jan Strupczewski)