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ECONOMY

German producer prices jump by 5.2 percent in April

German prices at the factory gate jumped by 5.2 percent in April, the biggest 12-month increase since August 2006, figures from the national statistics office showed on Tuesday.

German producer prices jump by 5.2 percent in April
Energy prices are driving the increase. Photo: DPA

Producer prices in the biggest European economy gained 1.1 percent from their level in March, the Destatis office said.

As is regularly the case, energy prices were largely responsible for the increases, and the annual rate of increase fell back to 2.7 percent once such elements were excluded, it added.

Persistently high inflation in the 15-member euro zone has led the European Central Bank to maintain its main lending rate at 4.0 percent even as the US Federal Reserve and Bank of England lowered their rates to underpin economic activity.

A breakdown of the German data showed that energy prices jumped by 12.6 percent overall in April, a sharp increase from the February and March rates of 7.0 and 8.2 percent, respectively.

Heating oil prices leapt by 54.6 percent, while the cost of diesel fuel gained 19.5 percent and petrol (gasoline) was up by 5.7 percent.

The prices of animal feed and fertilizer soared by 59.9 percent, while animal and vegetable oils and fats posted an increase of 44.8 percent, Destatis said.

Sharp increases in the prices of food and raw materials have sparked unrest in countries around the world, while soaring energy costs have curbed global economic growth.

In one of the latest reactions, French fishermen protesting high fuel costs have blocked ports and multiplied their demands for government compensation.

ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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