Price pressure in Germany is decreasing

Price pressure in Germany is decreasing

Food prices have been the strongest driver of inflation in Germany for months. Consumers had to pay 11.0 percent more in July than a year earlier. But there are signs of easing in the key inflation drivers: Producer prices for agricultural products fell in June by 4.9 percent compared to the same month last year, as the Federal Statistical Office announced today.

This means that producer prices for agricultural products fell in June for the third time in a row compared to the previous year. However, a statistical base effect played a role in producer prices because agricultural prices rose extremely sharply a year ago. Compared to the previous month of May, average prices increased by 0.9 percent.

The biggest drop in prices was for crops, which were 11.7 percent cheaper in June than a year earlier. There was a significant decline in cereals in particular. Fruit (8.8 percent) and vegetables (31.6 percent), on the other hand, increased in price at producer level. At minus 0.1 percent, animal products recorded the first year-on-year decline since May 2021.

Cheap energy lowers wholesale prices

A similar development is also evident in prices in German wholesale for the following month of July. The Federal Statistical Office also announced today that they fell for the fourth time in a row in July due to cheaper energy, by 2.8 percent compared to the same month last year. In June, prices fell by 2.9 percent, the most since June 2020, when the outbreak of the corona pandemic also caused economic turmoil.

From June to July, wholesale prices fell by 0.2 percent, also for the fourth month in a row. Petroleum products such as petrol had the greatest influence on the development of wholesale prices last month, which rose particularly sharply a year ago after the Russian invasion of Ukraine. These were now 20.8 percent cheaper than a year earlier.

Wholesale prices for grain, raw tobacco, seeds and animal feed were also lower (-21.4 percent) and for chemical products (-16.5 percent). In contrast, prices for live animals increased by 27.7 percent and for fruit, vegetables and potatoes by 27.5 percent.

Inflation could fall further

With the falling price pressure in wholesale and also in producer prices, inflation in Germany could also ease further. Because wholesalers act as a hinge between manufacturers and end customers, price reductions in wholesalers and producers usually reach consumers with a delay.


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