High energy costs are heating up the prices for commercial products in Germany. Because of the jump in energy prices, financial experts are also expecting higher inflation in the euro area than initially assumed.
Fueled by high energy prices, prices for industrial products in Germany rose at record speed in July. The producer prices increased by 37.2 percent compared to the same month last year, as the Federal Statistical Office announced on Friday in Wiesbaden.
It was the strongest increase within a year since the survey began in 1949. In June, the upswing had slowed somewhat (plus 32.7 percent). Compared to the previous month, producer prices rose by 5.3 percent in July – also a record increase.
Producer prices describe the price development for mining, industrial, energy and water management products produced and sold in Germany. They also affect consumer prices at a later stage in the economic process.
The development is still being driven by energy prices, which rose by 105.0 percent year-on-year. Natural gas was around 163.8 percent more expensive than in July 2021. Power plants even paid 234.7 percent more for natural gas, industrial customers 194.7 percent. Within a year, electricity prices rose by 125.4 percent and petroleum products by 41.8 percent.
Forecast screwed up
Financial market experts now expect an average inflation rate of 7.5 percent in the euro area this year, primarily because of the sharp rise in energy prices. In May 2022, the forecast for the year as a whole was still 6.3 percent, according to a special survey by the Mannheim research institute ZEW.
“The financial market experts still expect inflation to slow down over the next two years,” said ZEW researcher Frank Brückbauer. However, the forecasts have been moving further and further away from the ECB’s medium-term target of 2.0 percent for several quarters. In the next two years, those surveyed expect average inflation rates of 4.5 percent and 3.0 percent in the euro area.
For some of the 176 experts surveyed (43 percent), what they saw as the overly loose monetary policy of the European Central Bank (ECB) also contributed to the increase in inflation. In July, the central bank raised the key interest rate in the common currency area for the first time in eleven years. Critics accuse the monetary authorities of reacting too late.
Communication from the Federal Office of Producer Prices Communication from Eurostat on inflation
Source: Stern
Jane Stock is a technology author, who has written for 24 Hours World. She writes about the latest in technology news and trends, and is always on the lookout for new and innovative ways to improve his audience’s experience.
