Producer prices are seen as a harbinger of inflation. In September they fell at an unprecedented pace. The commercial products cost around 15 percent less than in the previous year.
In Germany, prices at manufacturer level have fallen at an unprecedented pace. Producers of commercial products – from potatoes to electricity – reduced their prices by an average of 14.7 percent compared to the previous year. September’s decline is the largest since records began in 1949 and also surpasses the previous record set the previous month.
This is good news for consumers: the prices for products are recorded in the statistics before they are further processed or put on sale. This enables early conclusions to be drawn about the development of consumer prices. These recently increased by 4.5 percent, the slowest rate since the start of the Russian war of aggression against Ukraine in February 2022. Experts such as ING chief economist Carsten Brzeski assume that the inflation rate can fall to around three percent by the end of the year.
Energy significantly cheaper
The statisticians explained the sharp price decline primarily with a so-called base effect: Last year, the prices that manufacturers received for their goods rose at a record rate of 45.8 percent. The main reason was Russia’s war against Ukraine, which made energy and many raw materials extremely expensive. However, prices have now fallen again, which is also depressing general inflation at the company level.
Energy prices are primarily responsible for the decline this year – they fell by around 35 percent compared to the previous year. In September 2022 they had reached a historic high. Electricity prices fell by 46.2 percent. Light heating oil fell by 10.9 percent, fuels such as gasoline by 8.0 percent. 36.9 percent less was charged for natural gas. Energy prices also fell month-on-month. Consumer and capital goods were more expensive than a year before.
Intermediate goods such as metals and chemical raw materials were also cheaper than in September 2022. Wood was also cheaper. Lime, cement, gravel and sand, on the other hand, were significantly more expensive than a year ago. The rise in prices, especially for mineral building materials, is making the situation in the construction industry even more difficult.
Sugar and potatoes are significantly more expensive
Food, on the other hand, recently cost 5.5 percent more than in the same month last year. Sugar prices rose particularly sharply (plus 84.7 percent). Processed potatoes cost 28.5 percent more. Fruit and vegetable products were 17.2 percent more expensive than a year earlier, and ice cream cost 18.5 percent more.
The producer prices reflect the selling prices of the producers. The development also affects consumer prices, on which the European Central Bank (ECB) bases its monetary policy. Because of high inflation, the ECB has raised its key interest rates significantly since last summer.