The increase in the cost of oil, gas and electricity is causing German producer prices to rise at an unprecedented rate. They increased in August by an average of 45.8 percent, as reported by the Federal Statistical Office. This was “the highest increase compared to the same month last year since the survey began in 1949”. This far exceeded the previous record value of 37.2 percent, which was reached in July. That comes as a surprise: economists had expected a minimal decline.
Banking economists were also amazed at the development. “An unbelievable price hammer,” commented LBBW economist Jens-Oliver Niklasch. “None of this bodes well for inflation. It’s here to stay.” Producer prices are considered to be the forerunners for the development of general inflation. In the statistics, the prices are listed from the factory gate – even before the products are further processed or sold. At least part of the enormous price increase should reach consumers. “There is enormous inflationary pressure in the pipeline,” said Commerzbank chief economist Jörg Kramer. Consumer prices could surpass the ten percent mark as early as September.
In August, the cost of living had risen by 7.9 percent. With the expiry of the 9-euro ticket and the tank discount, a further boost can already be expected in the current month of September, the Bundesbank also expects. The inflation rate is likely to “advance into the double-digit range in the next few months,” according to their current monthly report. The main reason for the sharp rise in producer-level inflation is energy, which has cost significantly more since the start of Russia’s invasion of Ukraine on February 24th. Producer prices here were 139.0 percent higher than in August 2021.