Status: 04/20/2023 12:14 p.m
The price increase at manufacturer level in Germany continues to slow down. That gives hope for inflation. In 2022, producer prices had risen by 45.8 percent at times.
Producer prices in Germany rose more slowly in March than they have in almost two years. Manufacturers of commercial products demanded 7.5 percent more for their products than a year earlier, according to preliminary information from the Federal Statistical Office today. This represents the lowest reading since May 2021.
Economists polled by Reuters had expected a decline to just 9.8 percent after February’s producer prices rose 15.8 percent. This is the sixth time in a row that the inflation rate has fallen since it peaked in August and September 2022 at 45.8 percent each. Compared to the previous month of February, producer prices fell unexpectedly by 2.6 percent, while a decline of only 0.5 percent was expected.
Are inflationary pressures declining?
The development is an indication “that the inflationary pressure is decreasing significantly and rapidly,” explained Sebastian Dullien, scientific director of the Institute for Macroeconomics and Business Cycle Research (IMK). Producer prices are seen as a precursor to the development of consumers’ living costs. This means that increases or decreases in producer prices usually reach private households, albeit with a delay and only partially.
The prices are recorded in the statistics even before the products are further processed or are sold, such as cement, metals and paper, but also toilet articles made of paper. In addition, the statisticians evaluate the producer prices for capital goods such as machines, durable goods and consumer goods such as food.
Inflation has already eased to 7.4 percent in March, after having been 8.7 percent in both January and February. According to Dullien, the inflation rate should average 5.4 percent for the year and 2.4 percent in 2024.
Energy prices fall month-on-month
According to the statisticians, the results are preliminary, as the effect of the energy price brakes that have been in effect since January and have only been implemented since March could only be partially taken into account. Energy prices continue to be primarily responsible for the increase in producer prices, although their rise has slowed significantly in recent months.
In March, producer prices for energy rose by only 6.8 percent compared to the same month last year, with the base effect playing a role. “Since energy prices had risen sharply shortly after the start of the Russian attack on Ukraine in March 2022, this, together with the price declines of the past few months, has now led to only a comparatively moderate increase compared to the previous year,” the statisticians explained.
Light heating oil was even a third cheaper than in March 2022, and fuel was 19.4 percent cheaper. On the other hand, food prices rose by 19.2 percent, with sugar prices in particular rising sharply by 89.2 percent.