German PPI falls in August for second month in a row, accelerating disinflation at output level

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Link Securities| Germany’s Federal Statistical Office, Destatis, published on Wednesday that Germany’s producer price index (PPI) rose 0.3% in August from July, slightly more than the 0.2% expected by FactSet consensus analysts.

On a year-on-year basis, Germany’s PPI fell by 12.6% in August (-6.0% in July), slightly less than the 12.8% expected by the analysts’ consensus. August was the second consecutive month of a year-on-year decline in the PPI, the steepest decline since data collection began in 1949, largely due to a base effect.

In August, energy prices fell by 31.9 per cent and electricity prices by 43.2 per cent. Meanwhile, prices of intermediate goods fell by 4.1 per cent, dragged down by declines in the prices of metals (-10.8 per cent), fertilisers and nitrogen (-40.8 per cent) and wood (-27.2 per cent). By contrast, in August and on a year-on-year basis, non-durable goods prices increased by 6.9%, driven by food prices (7.6%), in particular sugar (87.2%). Likewise, consumer durables prices rose by 5.2% in August on a year-on-year-year basis, driven by the prices of furniture (5.5%) and household appliances (5.7%); while those of capital goods rose by 5.51%, mainly the prices of machinery (6.4%) and motor vehicles (4.1%). Excluding energy, the PPI rose at a year-on-year rate in August by 1.2%.

Assessment: Thanks to the significant impact of base effects, especially energy prices, the German PPI declined in August for the second consecutive month, accelerating the disinflationary process at the production level, something that should also be reflected in the country’s inflation in the coming months.

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