Inflation remains high: Producer price rises remain at record highs

The prices for goods ex factory gate rose again in September more than at any time since records began. The biggest drivers are still the energy costs. For consumers, this means that the cost of living will once again increase significantly.

German manufacturers again raised their prices at record speed in September. As in August, producer prices increased by an average of 45.8 percent compared to the same month last year, as reported by the Federal Statistical Office. “Thus, August and September 2022 saw the highest increases in producer prices compared to the same month last year since the survey began in 1949,” it said. Economists had expected a slight decline.

“The increase in producer prices remains extreme,” said LBBW economist Jens-Oliver Niklasch. And this despite the fact that they increased by 2.3 percent in a month-on-month comparison, much more slowly than in August with 7.9 percent. In addition to energy, durable goods and consumables also cost significantly more. “A significant part of this will still reach private households in the coming months,” said Niklasch. “Inflation is high in 2022, it will remain high in 2023.”

Producer prices are considered to be the forerunners for the development of general inflation. In the statistics, the prices are listed from the factory gate – even before the products are further processed or sold. In September, consumer prices were 10.0 percent higher than a year earlier.

The main reason for the sharp rise in producer-level inflation is energy, which has cost significantly more since the start of Russia’s invasion of Ukraine on February 24th. Here, producer prices were 132.2 percent higher than in September 2021. Industry, for example, had to pay more than three and a half times as much for natural gas as in the same month last year.

In addition, partly as a result of the enormously expensive energy, prices for intermediate goods (16.8 percent), capital goods (7.8 percent) and durable and non-durable goods (10.9 and 18.3 percent) also rose significantly. Food was almost a quarter more expensive than in the same month last year. The prices for butter (72.2 percent), pork (46.3 percent), cheese and quark (39.7 percent) and milk (37.5 percent) rose particularly sharply. Coffee was 32.0 percent more expensive.