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BusinessGermany

German producer prices show record rise

August 19, 2022

Soaring natural gas and electrity prices are the main drivers of the rise. Prices paid to producers are seen as a precursor to inflation.

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Symoblic image, close-up of a hand holding several different euro banknotes, removing them from what appears to be a wallet.
July's year-on-year rise in producer prices was the highest on record in GermanyImage: Matthias Stolt/CHROMORANGE/picture alliance

Germans paid 37.2% more to producers for commercial goods in July compared to the same month the previous year, according to new data from the country's federal statistics agency released on Friday.

The new report from the Destatis agency indicates that natural gas and electricity are the main drivers of the increase in prices.

More than half of the increases for July could be attributed to energy costs; the year-on-year increase was just 14.7% when excluding them. 

Producer prices, the amount charged for goods by sellers, are considered one of the clearest indicators of inflation.

"Prices paid to producers for goods in Germany" infographic based on DESTATIS data
After years being virtually stagnant, German producer prices (one of the clearest indicators of inflation) have spiked this year; energy costs alone made up more than half the increase

The 'largest rise' since 1949

"This was the largest rise compared to the same month of the previous year since data began to be collected in 1949," Destatis said.

Energy prices have doubled because of the considerable increase in the amount paid for natural gas and electricity.

Power plants paid 234.7% more for natural gas in July compared to last year, and industrial users paid 194.7% more. The price of electricity increased by 125.4%, and that of petroleum products by 41.8%.

In June, the rate of change compared to the same month of the previous year was at 32.7%, and economists had previously predicted this rate might flatten out or even recede, only for the rate to accelerate in July.

A sign of inflation

Prices paid to producers are seen as a precursor to the development of inflation.

The statistics in the report refer to the price straight out of the gate of factories, before the products are further processed or sold.

Two government measures aimed at driving down inflation for consumers, the tax cut on fuel and the 9-euro ticket for regional transport, are set to expire at the end of the month. This means that higher inflation rates are expected in autumn.

Energy prices have soared as Germany attempts to move away from the use of imported natural gas from Russia in response to Moscow's invasion of Ukraine. Before the start of the invasion, global inflation was already on the rise due to supply chain disruptions and other economic fallout from the COVID-19 pandemic.

sdi/msh (Reuters, dpa)