OPINION
Market Rating Before FOMC MeetingJan 31
Record Rise in German Producer Index
According to the data released today by Destatis, PPI in Germany increased by 2.2 percent compared to the last month and reached 25.0 percent on annual basis. Market forecasts were 1.5 percent for MoM and 24.2 percent for YoY.
According to Destatis, energy prices as a whole were up 66.7 percent YoY and by 1.3 percent MoM. Mainly responsible for the high rise of energy prices were the strong price increases of natural gas, which was +119.0 percent on January 2021. Electricity prices rose by 66.7 percent and prices of mineral oil products by 32.9 percent. The overall index disregarding energy was 12.0 percent up on January 2021.
It is clearly seen in the data that high crude oil and natural gas prices in international markets are creating a strong cost pressure on German businesses. On the other hand, producer inflation in Germany recorded a record increase due to the premium outlook of commodity prices compared to the pre-pandemic period, global price increases due to supply bottlenecks and the weakening trend of the euro.
Effects of producer prices on consumer prices, which has reached the peak of 30 years with 4.9 percent in Germany, have not been completed yet. In other words, as seen in the chart above, cost pressures have not lost momentum and the effects on the consumer inflation is likely to continue in the first half of the year in Germany. In addition, the strong base effect, which will start to be taken into consideration especially in April, may have a limiting effect on the rise of annual CPI.
According to Destatis, energy prices as a whole were up 66.7 percent YoY and by 1.3 percent MoM. Mainly responsible for the high rise of energy prices were the strong price increases of natural gas, which was +119.0 percent on January 2021. Electricity prices rose by 66.7 percent and prices of mineral oil products by 32.9 percent. The overall index disregarding energy was 12.0 percent up on January 2021.
It is clearly seen in the data that high crude oil and natural gas prices in international markets are creating a strong cost pressure on German businesses. On the other hand, producer inflation in Germany recorded a record increase due to the premium outlook of commodity prices compared to the pre-pandemic period, global price increases due to supply bottlenecks and the weakening trend of the euro.
Effects of producer prices on consumer prices, which has reached the peak of 30 years with 4.9 percent in Germany, have not been completed yet. In other words, as seen in the chart above, cost pressures have not lost momentum and the effects on the consumer inflation is likely to continue in the first half of the year in Germany. In addition, the strong base effect, which will start to be taken into consideration especially in April, may have a limiting effect on the rise of annual CPI.
