September 20, 2022 02:24 AM ET
By: AnalysisWatch
Pressure on the European Central Bank to continue raising interest rates increased again on Tuesday as the eurozone's largest economy posted a new all-time high in factory price inflation.
German producer prices rose 7.9% in August, up 45.8% from a year earlier, statistics office Destatis said. Both figures were the highest in the 83-year history of the Federal Republic and far exceeded analysts' expectations. Economists had expected PPI growth to slow to just 1.6% for the month and 37.1% for the year.
Destatis said the biggest factor in this development was a sharp rise in electricity prices against the backdrop of growing problems with production from France's fleet of nuclear reactors.
These have been a major exporter of electricity in the past, but have recently been facing both technical problems and, increasingly, a lack of water in French rivers due to drought. Low water levels in German rivers, particularly the Rhine, have also made it almost impossible to transport coal to power stations in the south of the country. These concerns became particularly acute when Russia almost halted natural gas supplies at the end of the month.
Energy prices as a whole were up 139% from a year earlier and 20.4% from July. In particular, electricity prices rose by 175%. However, the rise was not limited to energy: prices of intermediate goods rose by 17.5% and capital goods by 7.8%, while prices of durable goods rose by 10.9% and non-durable goods by 16.9%.
Germany is also making steady progress in replacing Russian gas imports. According to German media reports on Monday, Chancellor Olaf Scholz is due to sign contracts for the supply of liquefied natural gas when he visits the United Arab Emirates on Sunda