Jump in German producer prices points to higher inflation pressure

As per the data the German producer prices rose by 5.2% year-on-year in April. This is the biggest increase in nearly a decade. The rise in producer prices followed a 3.7% year-on-year increase in March.

The federal statistics office said that when compared to the previous month, producer prices were up 0.8% in April. The index looks at factory gate prices, meaning before products or components are further processed or go on sale. Hence, it serves as an early indication of the development of overall consumer price inflation.

LBBW economist Jens-Oliver Niklasch said that the price pressures continue to point upwards also at the producer level. He also added that at the moment, it’s difficult to say how much of the costs companies will actually be able to pass on to consumers.

The supply bottlenecks and overall economic recovery are expected to push up price pressures in Germany. This is due to the government forecasting consumer price inflation. They say that it is to jump to 2.2% this year and to ease to 1.5% next year. European Central Bank board member Isabel Schnabel told German broadcaster ARD that the surge in euro zone inflation is temporary. He also said that in the next year, the consumer prices should fall sharply.