German producer prices post smallest increase in two years

BERLIN (Reuters) – German producer prices posted their slowest annual increase in two years in April, according to data released on Friday, in a tentative sign that inflation may ease further in Europe’s largest economy.

Producer prices of industrial products were up 4.1% in April on the same month last year following a 6.7% rise in March, the Federal Statistical Office reported.

A Reuters poll had indicated a rise of 4.0% year-on-year in April.

“This probably reflects a somewhat better economic situation, but second-round effects may also be a factor,” said Jens-Oliver Niklash, senior economist at German bank LBBW, referring to producers raising prices in response to higher input costs.

Producer prices give an indication on how consumer prices will develop. For the LBBW economist, the downward trend in producer prices shows that inflation may be falling.

Producer price inflation peaked at 45.8% in August and September 2022 and has been easing for seven consecutive months since then.

This is due to energy prices, which in April were only 2.8% higher than in the same month last year.

Energy prices had already risen sharply following the Russian attack on Ukraine in March 2022; this together with the price declines of the past months led to a comparatively moderate year-on-year increase, the statistics office explained.

Capital goods prices were one of the main reasons behind the rise in producer prices in April, increasing by 6.8% on the same month last year.

The statistics office publishes more detailed data on its website.

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