German producer prices show signs of life

Posted on November 18, 2016

Producer price inflation faced by German businesses remained stuck in deflation in October, but showed encouraging signs of picking up on the back of weaker energy price declines.

Year-on-year producer price inflation, which is considered an early gauge of inflationary pressures in an economy, fell 0.4 per cent last month – an uptick from the -1.4 per cent hit in September and in line with economist forecasts. The gauge has been stuck below zero since 2013 but last month’s fall was the smallest since September 2013 for Europe’s largest economy.

On a month-on-month measure, producer price inflation accelerated by 0.7 per cent in October compared to September – far exceeding forecasts of just a 0.2 per cent climb.

Destatis, Germany’s statistics agency, said energy prices slipped by 2.2 per cent in the month while consumer goods prices rose 1.1 per cent and durable goods costs rose 1.2 per cent.

Headline inflation in the German economy hit a two-year high of 0.7 per cent last month as the effects of last year’s global oil price slump fades out of the annual inflation basket.

Chart courtesy of Bloomberg

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