Monday, September 20, 2021
Producer prices rise dramatically
Economist: Inflation over five percent possible
High costs for energy, wood and steel drive producer prices. In August the increase was higher than it had been in decades. The increase also points to rising consumer prices. Experts do not expect the situation to relax until next year.
German manufacturers raised their prices more sharply in August than they have done in almost half a century. The producer prices of commercial products rose by twelve percent over the year, as the Federal Statistical Office announced. The last time there was a bigger plus was in December 1974, when prices rose by as much as 12.4 percent due to the first oil crisis. Economists had only expected 11.4 percent after the rate of increase in July had been 10.4 percent. In addition to energy, primary products such as wood and steel became more expensive.
The producer prices are considered to be a leading indicator for the development of consumer prices. In the statistics, the prices are kept ex-factory – i.e. before the products are further processed or go on sale. At 3.9 percent, the inflation rate is currently higher than it has been since 1993. “As a result, the inflation rate at the consumer level should continue to rise in the coming months,” concluded Commerzbank economist Ralph Solveen from the strong inflation at the producer level. “In the coming months this should have at least a four, maybe even a five before the decimal point.”
The development in energy was primarily responsible for the increase in producer prices last month. It went up by an average of 24.0 percent. Intermediate goods were 17.1 percent more expensive. Sawn softwood cost 124 percent more than a year earlier. Secondary raw materials (+104 percent). Considerably more was also charged for packaging made of wood (+89.4 percent) and reinforcing steel in bars (+87.2 percent).
“We are assuming that the current supply bottlenecks will gradually be overcome in the course of the coming year and that the upward trend in prices for primary products will therefore also weaken noticeably,” said Solveen. There will only be sustained, significantly stronger inflation if wages also rise noticeably. “And so far there are no signs of this,” said the expert.