German Producer Prices Take a Dive Again
Once more, German producer prices plummeted in October, marking the fourth consecutive monthly decrease. Industrial product makers, from dairy to fuel, slashed prices by a whopping 11.0% compared to the previous year, as per the Federal Statistical Office data.
Economists, anticipating this slide based on September's record-breaking 14.7% fall, weren't exactly surprised. However, the sharp decline from September to October was just 0.1%, highlighting the persistence of this price downturn.
Good news for consumers, you say? Absolutely! Costs of goods before any processing or sales are considered typically set the stage for consumer price movements. In fact, October saw consumer prices rising at the slowest pace in more than two years - just 3.8%. Experts predict a further decrease in the inflation rate by year's end.
So what's causing these price drops? Overly high prices in the preceding year, as detailed by statisticians, played a significant role. August and September 2022 saw astronomical price surges, topping 45.8% in both cases due to the Ukraine conflict, before October's milder 34.5% rise.
Energy prices, in particular, contributed the most to this downturn, reducing costs by 27.9% in October compared to the previous year. Electricity, lighting oil, petrol, and natural gas all saw significant declines.
But while energy prices tumbled, food prices continued to spike. Fruit, vegetables, and processed potatoes saw an increase of 3.7%, 16.0%, and 29.4%, respectively. Thankfully, items like butter, milk, and coffee saw some relief, with prices dropping by 29.5%, 8.8%, and 4.6%.
If you're an artisan butter maker, food processor, or fuel supplier, you're likely smiling at these declining figures. But manufacturers in other industries, like machinery and vehicles, saw the opposite, with rising costs driving up producer prices in upcoming months.
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Behind the Scenes
While October 2022's 11% price drop may seem extraordinary, it's important to put it in context. For instance, by December 2024, the producer price index would have increased by three percent compared to the prior year.
Furthermore, as we move towards 2025, consumer price inflation sits at 2.6%, driven by higher services prices. January 2025 saw a slight decrease in this inflation rate due to slower food and energy cost growth, albeit temporary.
