German producer prices stay subdued as energy prices heat up

German producer prices fell in October by 1.1% and in line with analyst expectations.

That was slightly better than the 1.4% fall in September but still the 16th fall in a row, according to the Federal Statistical Office.

The decrease in the Producer Price Index (PPI) figure for October was mainly because of a marked fall in energy prices, which was down 5.6% on September. 

Light heating oil prices plunged 22.7% in October, while prices for mineral oil products dropped 12.9%. Natural gas prices also plummeted 10.1% in October, compared with September, with fuel prices decreasing 12.1%. Electricity prices were also down 7.3%. 

Producer prices excluding energy prices inched up by 1.3% in October. Capital goods’ prices also rose 2%, with motor vehicles and parts’ prices increasing 1.4%. Machinery costs also advanced 2%. 

Similarly, durable goods’ prices inched up 0.9%, with consumer goods’ prices increasing 1.9%. Intermediate goods’ prices also went up 0.4%. 

The month-on-month producer price index came up to 0.2% in October, a significant rise from the 0.5% seen in September. This was also in line with market expectations. 

Hopes for rise in economic activity next year

The German economy continues to struggle with slowing industrial and economic activity, as higher interest rates and a rising cost of living deter consumer spending.

The European Commission said in its latest economic forecast for Germany: “Economic activity in Germany is expected to decline by 0.1% in 2024. High uncertainty has been weighing on consumption and investment, and the trade outlook has worsened as global demand for industrial goods weakened. 

“Going forward, domestic demand is set to pick up, driven by increases in real wages. This is expected to support a recovery in GDP growth to 0.7% in 2025 and 1.3% in 2026. The government deficit is projected to decrease and the government debt ratio to stabilise around 63% of GDP.”

German inflation is expected to average 2.4% in 2024, before falling to 2.1% in 2025 and reducing further to 1.9% in 2026.