German producer prices ease, but at lower pace than expected

GERMAN producer prices rose more than expected in January, though the rate of increase eased for the fourth month in a row, signalling that inflation in Europe’s largest economy could be starting to wane, according to data released on Friday (Feb 17).

Producer prices of industrial products were up 17.8 per cent on the same month last year, the Federal Statistical Office reported, compared with analysts’ expectations for the rate of increase to ease to 16.4 per cent.

Compared with December 2022, prices fell 1.0 per cent, which was above consensus for a drop of 1.6 per cent. The decline was driven by a 5.0 per cent drop in energy prices, with a particularly strong dip in electricity prices.

However, energy prices were also largely responsible for the year-on-year increase, being up 32.9 per cent on the year. The overall producer prices index disregarding energy was up 10.7 per cent on year.

Apart from energy costs, prices also rose significantly for non-durable consumer goods, intermediate goods, durable consumer goods and capital goods, which shows that price pressures are widespread.

“Firmer price pressures continue to be evident within investment and consumer goods,” David Muir, senior economist at Moody’s Analytics, told Reuters.

Moody’s expects easing supply constraints, lower energy prices and the impact of tighter monetary policy to contribute to a more broad-based moderation of producer price inflation through this year.

The figures for January are preliminary and are expected to be revised, as they do not account for relief measures to help consumers and businesses with gas and electricity bills, which will be paid out in March and cover January and February retroactively.

Revised figures for the producer prices in the first two months of the year will be published together with the preliminary results for March. REUTERS