Dhe producer prices in Germany, i.e. the prices at company level, were 45.8 percent higher in September than in the same month last year. The year-on-year increase was just as high as in August. Both were the highest values since records began in 1949. There are exceptional rates of increase for more and more prices: the gas price for industry rose by 264.8 percent. Electricity increased in price by 158.3 percent. The price of newsprint increased by 90.4 percent. The prices for pellets and briquettes from sawmill by-products rose by 144.3 percent within a year. Grain flour was 44.3 percent more expensive than in September 2021, feed for livestock cost 34.7 percent more.
“The energy price shock is slowly eating its way through the entire shopping basket,” commented Holger Schmieding, chief economist at Hamburg-based banking house Berenberg. The gas price effect is now also visible, for example, in the case of fertilizers: these have increased in price by at least 113 percent over the year. No wonder: the important precursor ammonia, which is produced with gas, was three times more expensive in September than a year earlier.
The price development at the producer level is also interesting because companies often pass on at least some of the increased prices to their customers with a slight time lag – and consumer prices and inflation continue to rise as a result.
“From the increase in producer prices one can deduce that a real calm will not come so quickly,” said Stefan Schneider, Germany’s chief economist at Deutsche Bank. To date, the massive increase in producer prices has only been partially passed on. “Surveys show that companies intend to continue raising their prices sharply in the coming months,” said Schneider. “This could lead to another jump in consumer prices, especially in January.”
What’s next for inflation?
In Germany, the inflation rate was 10 percent in September. In October and November, the rate could rise again, says Michael Holstein, chief economist at DZ Bank. It could still go up a bit: “But the inflation rate shouldn’t rise more than 11 to 12 percent,” predicts the economist. Holstein believes that the federal government’s gas price brake will have a dampening effect from December onwards: “Then the inflation rate should tend to fall again – provided that we see sustained stabilization in energy prices.”
Increase in producer prices: Newsprint increased in price by 90.4 percent over the year.
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Image: E.g
Overall, producer prices have risen more than they have since the end of the 1940s – but in a special subgroup, the prices for intermediate goods, the price increase has weakened somewhat in recent months, emphasizes Jörg Krämer, chief economist at Commerzbank. Although these prices were 16.8 percent higher in September than in the previous year, there was a small drop of 0.1 percent compared to August. Metals in particular play an important role in this item: Although these rose by an average of 18.1 percent over the year, there was a slight decrease of 0.3 percent compared to the previous month. This appears to be a result of recession concerns which have seen many commodities in global markets which had previously risen in price fall.
Commerzbank economist Krämer believes that the easing of price pressure for primary products will mean that the rise in consumer prices for industrial goods will peak in three to six months. Consumer price inflation could then fall again somewhat in the coming year, also because of the gas price brake. However, the economist is of the opinion that a sustained decline in inflation is unlikely – the ECB will not raise interest rates to a sufficient level out of consideration for highly indebted countries. Most recently, the central bank raised key interest rates twice, in July by 0.5 and in September by 0.75 percentage points. The next rate meeting is next week on Thursday. ECB President Christine Lagarde has announced another rate hike.
