German inflation: Producer price rises highest since 1949

Germany’s annual producer price inflation stood at 30% in March, the country’s federal statistics office said on Wednesday. That’s the highest level since the agency began collecting data 73 years ago.

The biggest culprit? Energy prices rose by almost 84% compared to the same month last year.

“Mainly responsible for the high increase in energy prices were the strong price increases of natural gas… [up] 144.8% at March 2021,” The statistics agency reports this in a statement.

It is one of the first signs of the huge influence the Russian invasion of Ukraine has about the German economy Europe’s largest. Between February and March alone, producer prices rose by almost 5%.

Consumers need to brace themselves. Factory inflation is fueling retail prices, and shoppers can expect to spend more on everything from furniture to meat, according to Wednesday’s figures.

German consumer price inflation is already at its highest point in 41 years, reaching 7.3% last month. Energy prices were the largest contributor, almost 40% higher than the previous month.
Global energy prices rose before Russian President Vladimir Putin ordered the invasion. As economies began to reopen after their pandemic lockdowns, fuel demand soared and wholesale prices skyrocketed.
But Western sanctions against Russia’s coal and oil exports — and efforts of the European Union to reduce the consumption of its natural gas – pushed the prices up even further.
Germany has so far resisted an embargo on natural gas, and rightly so. According to the International Energy Agency, the country depends on Russia for about 46% of its consumption. An abrupt break with its largest supplier would likely lead to rationing and seriously damage the energy-intensive manufacturing sector.
Economics Minister Robert Habeck has already warned Germans that they will “be poorer” as a result of the war.

“It is not possible that this will end at no cost to German society, it is unthinkable,” he said last month.

Rising prices have shaken a country that has long been proud of its stable economy and still harbors a deep-seated fear of the kind of hyperinflation of the 1920s and 1930s that it is widely believed to have helped the Nazi party to rise to power.

The European Central Bank has yet to raise interest rates to curb rising prices, unlike its counterparts in the United States and the United Kingdom, and has resisted calls to specify a date.

ECB President Christine Lagarde last week said she should keep her options open given the uncertain outlook for the region’s economy, and reiterated that the bank would only increase borrowing costs after it ends its government bond purchases at some point. the third quarter.

a German manufacturer, handle HENKY, announced on Wednesday that it would cease operations in Russia. The $25 billion chemical and consumer goods giant said it would continue to pay its 2,500 workers in the country. The maker of Persil laundry detergent did not say what financial consequences his departure would have.

Mitchell McCluskey contributed to reporting.

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