Producer inflation in Germany was below expectations
Producer prices in Germany rose 7.5 percent on-year in March, below expectations, recording the smallest annual increase since June 2021.
According to data from the German Federal Statistical Office (Destatis), the country’s Producer Price Index (PPI) decreased by 2.6% in March compared to the previous month and increased by 7.5% annually.
While the upward pressure on producer prices eased with the drop in energy prices, it was notable that it rose below analysts’ expectations in March.
The market expectation was that the PPI would rise 9.8 percent annually in March.
Notably, the annual PPI increase in this period was the smallest annual increase since June 2021. In March, the monthly decline in producer prices was brought to the sixth month.
NOTABLE INCREASE IN FOOD PRICES
Destatis said the data on producer prices in March is leading data and will have to be revised as the price brake that came into effect in March for power and gas broke the calculations.
Despite the decline in energy prices in March, it was the most important reason for the annual increase. Energy prices rose 6.8 percent compared to the same period last year.
While natural gas distribution prices increased an annual 19.1 percent in March, electricity prices were unchanged.
On an annual basis, prices of intermediate goods rose 4.7 percent, consumer durables 10 percent, and capital goods prices 7.5 percent.
It should be noted that food prices increased by 19.2% annually, while sugar prices increased by 89.2%.
PPI ENERGY PRICES RISE 7.9 PERCENT
Excluding energy prices, the PPI rose 7.9 percent on-year in March.
On the other hand, production prices are considered a leading indicator of the evolution of inflation. It affects consumer prices, on which the European Central Bank (ECB) bases its monetary policy.
After wavering for a while in the face of high inflation, the ECB had raised policy rates significantly.
Meanwhile, annual inflation in Germany, which was 8.7 percent in January and February, dropped to 7.4 percent in March due to falling energy prices.
The German Central Bank (Bundesbank) expects inflation in the country to remain at 7.2 percent in 2023 before falling to 4.1 percent in 2024. (BRITISH AUTOMOBILE CLUB)