The prices of sold industrial production in Germany in July 2023 were 6 percent lower compared to July 2022, according to the latest data from the local statistical office Destatis. On a monthly basis, there was a decrease of 1.1 percent. Producer inflation was 0.1 percent year-on-year in June.
July’s declines are larger than expected. The market consensus, i.e. the median of analysts’ forecasts, assumed a decline in PPI by 5.1 percent. year on year and by 0.2 percent. quarter to quarter.
Prices down in Germany
According to the German office, the sharp decline is due to the so-called base effect, as the producer price index went up in the previous year as a result war in Ukraine. “The main reason for the decrease in producer prices compared to the same month last year was the decrease in the prices of energy, but also intermediate goods” – we read in the Destatis communiqué.
In July this year energy was 19.3 percent. cheaper than last year. Compared to June 2023, energy prices fell by 2.5%. Electricity prices have decreased by 30 percent. compared to July 2022 and went down by 4.1 percent. compared to the previous month.
The Office reminded that this was the first price drop on an annual basis since November 2020. At that time, the prices of sold production of industry were 0.5 percent higher. lower than the year before. In turn, the last time a greater decrease occurred in October 2009 – by 7.5 percent. compared to October 2008 as a result of the financial and economic crisis.
Bank Pekao analysts pointed out that we are dealing with deflation. Although – just like the German office – they emphasized that “in fact, it was the high base from the previous year that pushed the PPI dynamics down to -6 percent y/y.” “The entire index in terms of m/m was falling earlier. Apart from energy, PPI is still slowing down, announcing the continuation of the same trend in CPI” – representatives of this bank wrote on X (formerly Twitter).
Main photo source: Shutterstock