Energy, steel, wood: producer prices are rising as sharply as they were in 1975

Energy, steel, wood
Producer prices are rising as fast as they were last in 1975

The prices of industrial products have risen faster than they have been in almost 50 years. Most German companies state that they are affected by material bottlenecks and higher costs.

The German manufacturers raised their prices in July more sharply than in over 46 years. The producer prices of commercial products rose by 10.4 percent compared to the same month last year, announced the Federal Statistical Office. The last time there was a bigger plus was in January 1975, when prices rose sharply in connection with the first oil crisis. Economists polled by Reuters had only expected 9.2 percent, after the rate of increase had been 8.5 percent in June. In addition to energy, primary products such as wood and steel became more expensive.

From A for aluminum to Z for cellulose fleece: material bottlenecks and higher procurement costs are now a burden for the vast majority of companies. As a result, 88 percent are struggling with higher purchase prices, as the German Chamber of Commerce and Industry (DIHK) found out in its survey of almost 3,000 companies. The result: two thirds feel compelled to pass on increased costs to their customers.

Energy prices rose by an average of 20.4 percent. The reason for this is primarily a base effect due to the sharp fall in prices in spring 2020 in the wake of the pandemic, it said. The German CO2 pricing on fuels such as mineral oil products and natural gas, which has also been incurred in some cases since January, also had an impact. Intermediate goods were 15.6 percent more expensive. Sawn softwood cost 111 percent more than in July 2020. Metallic secondary raw materials from iron, steel and aluminum scrap (+100 percent), but also reinforcing steel in bars (+82 percent), cost considerably more. For pig iron, steel and ferro-alloys, the premium was 52.3 percent.

The producer prices are considered to be a leading indicator for the development of inflation. In the statistics, the prices are kept ex-factory – i.e. before the products are further processed or go on sale. You can use it to give an early indication of the development of consumer prices. At 3.8 percent, the inflation rate is currently higher than it has been since 1993 and, according to economists, could now move towards five percent.