Berlin - German producer prices surged to a 27-year high in July, the country's statistics office said Tuesday, further reducing the prospects of the European Central Bank (ECB) delivering a cut in interest rates.

Annual producer prices in Europe's biggest economy climbed by 8.9 per cent last month to record the fastest rise since October 1981 with the increase coming amid signs of slumping European economic growth.

In June, producer prices, which are considered to be an indicator of inflationary trends, rose by an annual 6.7 per cent.

The ECB raised rates by 25 basis points to 4.25 per cent last month to help ward off resurgent inflation fuelled by high energy and food prices.

Annual energy prices jumped 24.5 per cent in July, the statistics office said.

However, the latest German price data underscores the dilemma facing the ECB as it faces up to renewed inflationary pressures at a time when the global credit crunch and rising consumer prices are undercutting world economic growth.

But analysts say with the ECB continuing to emphasize the importance of fighting inflation, Tuesday's jump in producer prices is likely to make it difficult for the Frankfurt-based bank to ease monetary policy to help shore up growth. (dpa)