Economy in Germany: Producer prices show unexpected decline

Producer prices fell again in April, and more sharply than expected. Manufacturers of industrial products – from food to industrial goods – demanded an average of 0.9 percent less in Germany than a year earlier, the Federal Statistical Office announced on Tuesday. Economists surveyed by the Reuters news agency had only expected a decline of 0.6 percent, following a 0.2 percent decline in March.

From March to April, producer prices fell by 0.6 percent, also more than expected. "The energy price trend masks the fact that prices have been rising across the board and have been doing so since the beginning of the year," said Chief Economist Cyrus de la Rubia of Hamburg Commercial Bank. "In this respect, the development in producer prices is not yet a completely convincing argument for expecting a sustained decline in inflation."

In the statistics, the prices of products are recorded by manufacturers before they reach wholesale and retail outlets. They are therefore an early indicator of consumer price trends. Cheaper energy pushed the inflation rate in April to its lowest level in six months. Prices for goods and services rose by only 2.1 percent – ​​the lowest level since October 2024.

The main reason for the decline was lower energy prices. These fell by 6.4 percent compared to April 2024. Electricity prices fell by 7.5 percent, while natural gas became 6.2 percent cheaper. District heating was 0.1 percent cheaper than a year earlier. Excluding energy, overall producer prices rose by 1.5 percent year-on-year.

Food prices, on the other hand, increased by 3.8 percent. Coffee (+43.3 percent), beef (+30.4 percent), butter (+24.6 percent), and vegetable oils (+15.8 percent) were significantly more expensive compared to the same month last year. However, sugar, in particular, was cheaper than a year ago, at -38.0 percent, and pork at -7.7 percent.

Capital goods became more expensive. Machinery, for example, cost 1.9 percent more than in April 2024. Prices for motor vehicles and motor vehicle parts rose by 1.4 percent.