Industrial production prices, which include the cost of products leaving the factory, experienced an interannual fall of 14.7% in Germany last September, which means the sharpest decline since these data began to be collected. in 1949. Industrial prices were already coming off a notable drop in August, of 12.6%. According to the Federal Statistical Office (Destatis), this development is mainly attributed to a base effect due to the very high price level last year, when the war in Ukraine caused an increase in production costs in August and September, which was , in turn, the highest since records exist.
For much of last year, records were broken in the cost of products leaving the factory. The big culprit for the increases was the price of energy, which was skyrocketing for several months in a row. Industrial production prices are considered a precursor to the development of inflation, so the figures recorded then indicated that the increase was going to be transferred to the pockets of consumers, as it happened.
Now the opposite effect is expected, that is, a greater moderation of inflation, which has finally begun to subside. In September it stood at 4.5%. A relief for German consumers, because although the shopping basket is still very high, they can finally celebrate that it is the smallest increase since February 2022, when the war in Ukraine broke out. Experts such as ING chief economist Carsten Brzeski expect that the inflation rate could fall to around 3% by the end of the year.
According to Destatis, lower energy prices are the main reason for the year-on-year decline in output prices. Intermediate goods also cost less than a year ago, although higher prices had to be paid for consumer and capital goods than in September 2022.
Energy prices have fallen by 35.3% this September compared to September 2022, which is also excellent news for the German manufacturing sector, as well as for private consumers. The energy bill had skyrocketed after the start of the Russian attack on Ukraine in February 2022, and reached a historical maximum in September 2022. Specifically, electricity is what has most influenced the fall. For all customer groups, the price of electricity has decreased by 46.2% compared to the previous year. But natural gas has also given good news (-36.9%), as well as petroleum products (-9%) and heating fuel oil (-10.9%).
“Germany is making clear progress in the fight against inflation,” he says in Der Spiegel the economist Sebastian Dullien, director of the Institute for Macroeconomics and Economic Research (IMK) of the Hans Böckler Foundation. “The current developments are also another indication that the interpretation of current inflation as inflation triggered by external shocks to prices, especially energy, was correct,” he adds.
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