August 22, 2022: -German producer prices bounced at the fastest rate in July, underscoring the negative outlook for Europe’s largest economy, which is stuck in zooming costs and weakening growth due to the Ukraine war. Producer prices surged 37.2% on the year, the most significant rise since records started in 1949, the federal statistics office said.
The finance ministry said that the economic outlook for Germany is harmful because of the energy price climbs and supply chain troubles, a message underlined by a record increase in producer prices.
The German economy, Europe’s biggest, stagnated in the second quarter, zooming in on energy prices, Ukraine’s war, the pandemic, and supply disruptions, bringing it to the edge of a downturn.
“The outlook for further development is noticeably down,” the ministry said in its August monthly report, which adds that it was marked by “a high degree of uncertainty.”
“The big lower gas supplies from Russia, the persistently high price increases for energy and, increasingly, different goods, and the longer-than-expected supply chain troubles, in connection with the zero-COVID policy of China, are weighing heavily on the economy’s development,” it added.
Producer prices, considered a leading indicator for inflation, saw their highest increase in the month and the year in July, driven primarily by high energy prices, said the federal statistics office on Friday.
The office said that energy prices were up 105% compared with July 2021, due mainly to higher prices for natural gas and electricity.
Feeding into high energy costs, the German government will impose levies on gas consumers from October 1, which adds several hundred euros to the average annual energy bill of the family. The sales taxes on gas are ready to be decreased to 7% from 19% while the levies are in place.
Higher energy prices mean inflation is doubtful to cool off anytime soon; Germany’s inflation rate was 8.5%, in line with the broader eurozone’s record rate of 8.9%.
In April, the German government forecasted 2022 inflation at 6.1%. It will present updated economic points on October 12, the finance ministry added.