Title: German Producer Prices Accelerated Again in July, Rising 37% on Year
Aug 19, 2022 02:27AM ET
Producer price inflation worsened markedly in July as energy shortages and persistent post-pandemic effects caused a fresh surge in producer price inflation.
Factory prices rose by a staggering 5.3% month-on-month, the largest single increase since the Federal Republic began compiling its data in 1949. Year-on-year, prices rose by 37.2%, greatly disappointing hopes of a slowdown to 32.0%.
Producer prices are usually reflected in consumer prices with some lag. Despite signs of a slowing economy, the data suggest that the upward momentum of inflation in the euro area is not broken.
The statistics office, Destatis, said that energy prices more than doubled from a year earlier as Russia cut natural gas supplies in response to European sanctions imposed on it over its invasion of Ukraine.
Specifically, power plants had to pay 234% more than in July 2021 for the natural gas they had to scrounge on the spot market after Russian export monopoly Gazprom cut supplies to zero for most of the month. They have been running at only 20% of contract levels since the scheduled maintenance was completed.
Similarly, electricity prices for distributors have more than tripled.
The figure was all the more disappointing as oil prices softened significantly this month, falling 4.3% from June as world oil prices fell.
However, prices for heating oil, which is increasingly used by businesses as a substitute for natural gas, were up 108% on the previous year.
Excluding energy prices, Destatis said producer prices rose 0.4% for the month and 14.6% for the year.
The figures offer no relief to the European Central Bank, which has indicated that it will raise interest rates aggressively at its meeting next month if the inflation trend does not improve.