Raw material and energy costs have risen sharply

German producer prices - a measure of what firms pay for raw materials and commodities - rose faster in February than at any time since 1982.

This was mainly due to the soaring cost of electricity, natural gas, heating oil and liquefied natural gas.

Analysts said the data suggested that the eurozone would see further interest rate rises this year.

Costly oil

Worried about rising inflation as Europe's largest economies perform better, the European Central Bank (ECB) has already increased rates once this year to 2.5%.

Germany, Europe's largest economy, saw a 5.9% rise in producer prices in February compared to the same month last year.

We have a very strong economy and a moderate rise in interest rates is certainly appropriate Stefan Muetze, Helaba Landesbank

This represented the largest annual rise since June 1982.

Continued cold weather on the continent has increased demand for heating oil and natural gas, in turn pushing up prices.

Heating oil costs rose 73% year-on-year while natural gas and electricity costs rose 29% and 24% respectively.

'Expansive phase'

Economists said rising industrial prices had yet to translate into higher prices for consumer goods in Germany.

However, they said the ECB would want to pre-empt any upward movement in inflation by raising rates again soon.

"We are still in an expansive phase with ECB interest rates," said Stefan Muetze, an economist with Helaba Landesbank.

"We have a very strong economy and a moderate rise in interest rates is certainly appropriate."