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German producer prices hit record highs in May due to soaring energy costs. This suggests that households in Europe’s largest economy need to be prepared for higher consumer prices as at least some of their higher business costs tend to be passed on to end consumers. ..
German statistical agency Said on June 20th Its producer price gauge jumped 33.6 percent annually in May. This is the fastest pace since the start of data collection in 1949.
The overall index, excluding energy, rose 16.5 percent in May, while soaring energy prices drove most of the rise in producer prices. This is a rise from April and is a sign that cost inflation is more widespread and is pervading other categories such as food, which rose 19.2% in the year to May.
“Inflationary pressures continue to rise in Germany,” said market analyst and writer Holger Zschaepitz. Said in a Twitter postHe added that soaring input costs suggest that consumer prices are “on the wall” that are likely to rise further in Europe’s largest economy.
Germany’s annual consumer price index surged to 8.7% in May, while consumer price inflation across the euro area rose to a record high of 8.1%.
Energy costs fell below most of the surge in the producer price index, rising 87.1% year-on-year in May. Light kerosene rose 96%, motor fuels rose 49.4%, and natural gas rose 148.1%.
Germany, which relies heavily on Russia for its natural gas flow, is trying to reduce its consumption in order to reduce its reliance on Moscow for its supply.
Germany’s economic minister, Robert Habeck, said on Sunday that the country needs to reduce domestic consumption of natural gas and increase coal burning to fill winter gas storage facilities.
“The situation is serious,” Habeck said. Said in a statement.. “Therefore, we continue to take precautions and take additional steps to reduce gas consumption, which means we need to reduce gas consumption even more, but more. Gas needs to be put into the storage facility, otherwise things will be very difficult in the winter. “
The day after Habeck’s remarks, European natural gas prices soared by more than 7% during the day, rising sharply as Russia’s supply cuts last week caused shortages and ration concerns.
Russia has seen a rise following last week’s rise in European natural gas prices by more than 40% as Russia cuts supply to top European buyers and denounces technical issues related to Western sanctions. German and Italian leaders called Russia’s cuts a political move.
Producer price data on Monday adds concern that the German economy is heading for a rough patch.
As some think tanks predicted last week, Germany’s inflation rate is likely to rise and economic growth is expected to slow this year. The Ifo Institute for Economic Research, a Munich-based research institute, has lowered Germany’s growth forecast for 2022 from the previous 3.1% to 2.5% and revised the inflation forecast from the previous 5.1% to 6.8%.
“Earlier this year, high prices led to a loss of purchasing power for individual households, which in turn led to lower commodity consumption,” said ifo economist Timo Wollmershaeuser in a statement.
Germany’s IfW Institute for Economic Research has raised Germany’s inflation outlook for 2022 from the previous forecast of 5.8% to 7.4%.
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Tom Ozimek has a broad background in journalism, deposit insurance, marketing and communication, and adult education. The best writing advice he has ever heard is from Roy Peter Clark.
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