German producer prices continue to fall – these are the current figures

Petrol, electricity, gas

Producer prices in Germany fell in December compared to the previous month – mainly because energy became cheaper.

(Photo: Imago, dpa (2))

Berlin German producers are asking less and less money for their goods. Producer prices of industrial products have fallen for the third month in a row. In December they are around 0.4 percent compared to the previous month, as the Federal Statistical Office announced on Friday.

In relation to the same month last year, producer prices in December are 21.6 percent gone up. But the comparison with the level before the Russian attack on Ukraine is now less meaningful because there have been huge price shifts since the outbreak of the war.

Significant declines were already apparent in October and November. Previously, producer prices had been rising for a long time, since May 2020.

“Now this is another spectacular decline,” says Düsseldorf economist Jens Südekum. “For the development of inflation that’s a very good sign.”

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Producer prices are arguably the most important precursor to inflation. In the statistics, the prices for raw materials and industrial products are listed from the factory gate – even before the products are further processed or sold.

Producer price developments suggest that recent developments in inflation are likely to continue. In October, the increase in consumer prices at 10.4 percent compared to the same month last year had its highest value in the reunified Germany achieved. Since then, the inflation rate has been falling, most recently to 8.6 percent in December.

The most important factor is again energy prices

The most important factor for the decline in producer prices in December was again the gradual relaxation on the energy markets. According to figures from the Federal Statistical Office, energy prices fell by one in December percent down compared to the previous month.

The gas price at the TTF wholesale center has fallen by 70 euros per megawatt hour since mid-December. In the case of electricity, the monthly average per megawatt hour on the Leipzig electricity exchange in July 2022 was almost 500 euros, in January it was not even 100 euros.

Large industrial companies that buy gas and electricity directly benefit from this. So there is a double relief: the economy is under less pressure and some companies will lower their prices, which also benefits the end customer.

Excluding energy, producer prices in December remained the same as in the previous month. Food prices, in particular, have continued to rise; sugar, for example, cost 11.6 percent more than in the previous month.

Some of the energy prices, which rose sharply in summer and autumn, are only now being passed on by the producers. On the grain market, the frequent failure of deliveries from Ukraine is driving prices. Federal Minister of Agriculture Cem Özdemir (Greens) recently called for VAT relief on food again.

Price relaxation raises hopes for Economy

Leading indicators, above all producer prices, give the federal government hope that inflation will ease further. In its latest economic forecast, it is expected to lower its inflation forecast for 2023 to six percent. In the autumn projection, she had assumed seven percent. A decline in inflation to 2.8 percent is now expected for 2024.

The easing of prices could lead to better economic development overall. The Federal Government is no longer assuming a recession in Germany for the current year.

>> Read here: “We are at the turning point of the world economy” – Harvard economist Kenneth Rogoff in an interview

In the new economic forecast that Federal Economics Minister Robert Habeck (Greens) will present next Wednesday with the annual economic report, the government has not only adjusted its inflation forecast.

She also expects gross domestic product (GDP) to grow by 0.2 percent in 2023. The Handelsblatt learned this from informed circles, the Reuters news agency had first reported. In October, the government had expected a decline of 0.4 percent.

However, the figures from the new forecast are still provisional. They are subject to change before the annual economic report is published.

The German Savings Banks and Giro Association (DSGV), on the other hand, is more pessimistic. The DSGV does not expect inflation to fall too quickly and expects a rate of eight percent in 2023. The outlook for GDP is correspondingly worse. Here, the interest group expects a minus of 0.8 percent.

More: Five reasons that speak against a recession in Germany

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