German producer prices rise at record pace amid energy crisis

Producer prices in Germany rose at record pace in April as factory gate prices for industrial products were 33.5 percent higher than a year ago, the Federal Statistical Office (Destatis) said on Friday.

Energy prices soared 87.3 percent and continued to be “mainly responsible” for greatest price increases since the Federal Republic of Germany was founded in 1949, Destatis said. Without energy, the overall producer price index would have risen by 16.3 percent only.

The development was impacted by the Russia-Ukraine conflict, according to Destatis, along with the rising factory gate prices. “Inflationary pressure on end-consumers remains very high,” said Jens-Oliver Niklasch, expert at Landesbank Baden-Wuerttemberg (LBBW).

Driven by soaring energy and motor fuel prices, inflation in Germany stood at 7.4 percent, a 40-year high, in April. The last time prices increased at comparable speed was during the Iran-Iraq war that started in 1980. Eurozone inflation was even slightly higher at 7.5 percent.

The German government has recently lowered its 2022 economic growth forecast from 3.6 percent to 2.2 percent, expecting annual inflation to reach 6.1 percent, almost twice as high as previously assumed. “The risks to the economy are significant,” Minister for Economic Affairs Robert Habeck said when presenting the outlook in April.

Although inflation is rising at record pace, German companies are “unable to fully pass on these costs to their customers and are reducing their profit margins accordingly,” Timo Wollmershaeuser, head of forecasts at the Munich-based ifo Institute of economic research, said earlier this month.

The wholesale trade and manufacturing sectors were able to pass on more than 50 percent of cost increases to their customers. Retail, construction and service providers, however, could “only pass on a small portion,” Wollmershaeuser added.