German PPI Hits New All-Time High as Electricity Prices Soar

By Geoffrey Smith 

Investing.com — The pressure on the European Central Bank to keep raising interest rates increased again on Tuesday as the Eurozone’s largest economy recorded a new all-time high for factory gate inflation. 

rose by 7.9% in August, and were up 45.8% from a year earlier, statistics office Destatis said. Both figures were all-time records in the 83-year history of the Federal Republic and were well above analysts’ expectations. Economists had expected the PPI to slow to only 1.6% on the month and 37.1% on the year. 

Destatis said the biggest factor behind the development was the surge in electricity prices against a backdrop of increasing problems with output from France’s fleet of nuclear reactors. 

These are historically a big exporter of power, but have been dogged both by technical problems and, increasingly, a lack of water flow in France’s rivers due to drought. Low water levels in Germany’s rivers, particularly the Rhine, also made it nearly impossible to ship coal to power stations in the south of the country. This concern became particularly pressing as Russia all but stopped shipments of natural gas at the end of the month.

Energy prices as a whole were up by 139% from a year earlier and by 20.4% from July. Electricity prices in particular rose 175%. However, the increases weren’t limited to energy: prices for intermediate goods rose 17.5% and prices for capital goods rose 7.8%, while durable and non-durable consumer goods rose 10.9% and 16.9%, respectively.

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