Price development
Energy prices weigh on industry – inflation rate rises
Wood, metals – energy: The Federal Statistical Office recorded particularly serious price increases in these areas. Photo: Finn Winkler / dpa
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Rapidly rising energy prices are a cause for concern, and not just for citizens. Industry is also suffering. Across Europe, the inflation rate is rising to its highest level since the international financial crisis.
The rapid rise in energy prices is having a full impact on German industry. In September, according to new figures from the Federal Statistical Office, manufacturers increased their prices more sharply than they have been in almost 50 years.
In a year-on-year comparison, producer prices rose by 14.2 percent, the fastest they have been since October 1974. The main cause of the development is the jump in energy prices. The German Institute for Economic Research (DIW) assumes that the current sharp rise in inflation will not last, but that worries about price increases could further fuel inflation.
According to the Federal Statistical Office, gas rose particularly sharply in September, with the average price skyrocketing by almost 59 percent. Apart from that, the prices of many materials and intermediate products that the industry processes are also rising. Metals were on average 35.5 percent more expensive than a year earlier. The steel and metal processing trade association has already warned of the threat of a large-scale company death.
Many economists still assume a temporary phenomenon, but the DIW economists believe that a self-reinforcing effect is possible if fear of inflation spreads. The authors of the study, Kerstin Bernoth and Gökhan Ider, argue that the sharp rise in prices is mainly due to one-off measures and events, including the withdrawal of the VAT cuts.
“Danger threatens more from the expectations,” warned Bernoth. If consumers and businesses assume that prices will continue to rise, “people will prefer purchases and demand higher wages. The companies, in turn, will add their prices if they expect to have to pay higher wages and higher producer prices. ” According to the economist, this could set in motion a wage-price spiral. “Higher inflation expectations could then become a self-fulfilling prophecy and boost actual inflation.”
In Germany, the inflation rate in September, at 4.1 percent, passed the four percent mark for the first time in almost 28 years.
In the entire euro area, the inflation rate reached 3.4 percent in September, its highest level in 13 years. The statistics agency Eurostat confirmed its previous survey on Wednesday. The last time inflation was higher was in September 2008.
The so-called core inflation rate excluding energy and food also rose, rising from 1.6 percent in August to 1.9 percent. The European Central Bank also regards the rise in inflation as temporary and points to numerous special effects, most of which can be traced back to the pandemic. However, last year many economists still expected that there would be no noticeable rise in inflation.
The outgoing Bundesbank President Jens Weidmann appealed in the context of his resignation to his colleagues in the ECB, “not to look one-sidedly at deflation risks, but also not to lose sight of prospective inflation risks”.
The steel and metal processing trade association painted a gloomy scenario on the wall. “The rapid rise in prices for industrial electricity and natural gas means for many medium-sized industrial companies in steel and metal processing that they can no longer produce in Germany,” said a statement by the association, which according to its own information represents a good 5000 companies, mostly family businesses . “The backbone of German industry is dying.”
The association appealed to the large corporations to “recognize” the situation of their medium-sized suppliers. The association called on the federal government to temporarily forego state levies such as the EEG surcharge, which make energy prices more expensive.