As a result of the war in Ukraine, German manufacturers once again raised their producer prices at record speed in May. They increased by an average of 33.6%. “This was the biggest increase compared to the same month last year since the survey began in 1949,” the Federal Statistical Office said on Monday. “This means that commercial producer prices have seen new record increases every month since December 2021.” Economists polled by Reuters assumed an unchanged figure of 33.5%. From April to May alone, producer prices rose 1.6%.
The development does not bode well for consumers as it is considered a harbinger of general inflation. In statistics, prices are listed from the factory gate – even before products are processed or sold. At 7.9%, the inflation rate is currently higher than it has been since the winter of 1973/1974.
“So far, companies have probably only partially passed on the massive increase in producer prices to end consumers,” said Ralph Solveen, an economist at Commerzbank. “That’s why the underlying impetus for consumer prices should at least remain very high and possibly even pick up a little.” LBBW economist Jens-Oliver Niklasch agrees: “There doesn’t seem to be any trend reversal in sight for energy prices in particular, especially since the news of Russian natural gas cuts.”
The construction industry is also sounding the alarm
The main reason for the sharp rise in prices is again energy, which has cost significantly more since the start of the Russian invasion of Ukraine on 24 February. Producer prices here were 87.1% higher than in May 2021. Natural gas rose 148.1%. Petroleum products cost 55.8% more than a year earlier. Light heating oil was almost twice as expensive, while 49.4% more was needed for fuel.
There was also a rise in the prices of intermediate goods, especially metals, fertilizers and animal feed, in addition to industrial gases and wooden packaging. Food prices rose 19.2%. Butter prices (+80.2%), untreated vegetable oils (+68.4%), beef (+42.9%), coffee (+33.6%) and milk and dairy products (+24 1). “The high rates of inflation that have now been achieved for consumer goods are worrying for consumers,” said LBBW economist Niklasch.
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But the construction industry is also sounding the alarm. Their companies have to pay 26.7% more for asphalt, for example. The sharp rise in material prices and therefore construction costs make it difficult for companies to start up, said Tim-Oliver Müller, general manager of the leading German construction industry association. “In the case of projects started several months or even years ago, this development could in no way have been foreseen when the contract was signed.” If fixed prices were agreed, the companies themselves would have to bear the increased costs. Almost every fourth civil engineering company is affected by this.