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The worth of products produced by German firms has fallen on the quickest annual charge since information started in 1949, pointing to additional falls in inflation in Europe’s largest financial system.
The federal statistical company said producer costs of German industrial merchandise fell 14.7 per cent within the yr to September, dragged decrease by falling wholesale power costs.
Excluding power, German producer costs rose 0.8 per cent from a yr earlier. Producer costs are seen by economists as an indicator of future costs paid by consumers, that are used to calculate shopper worth inflation.
In an additional signal of weak point within the German financial system, exports of goods outside the EU declined 8.7 per cent within the yr to September, with double-digit falls in shipments to each the US and China, Germany’s two primary buying and selling companions.
Germany’s economy has contracted or stagnated for the previous 9 months and the IMF this month predicted it might be the worst-performing main financial system this yr, with output contracting 0.5 per cent earlier than returning to tepid development of 0.9 per cent subsequent yr.
Oliver Rakau, an economist at consultants Oxford Economics, mentioned falling exports had been “one more reason to count on a reasonably hefty quarterly drop in German gross home product within the third quarter”, predicting output would decline 0.4 per cent from the earlier quarter.
Different latest German financial information have additionally been weak, together with August’s 0.2 per cent decline in industrial manufacturing from July and a 1.2 per cent decline in retail gross sales in the identical interval. Rakau mentioned the latest “weak point” pointed to “one other contraction” in fourth-quarter GDP.
Slowing financial exercise is contributing to a cooling of worth pressures, as proven by the 0.2 month-on-month decline in German producer costs.
Anna Titareva, an economist at Swiss financial institution UBS, forecast that German shopper worth inflation would proceed falling quickly, dropping from 4.3 per cent in September to three.3 per cent in October.
This might contribute to a equally “massive drop” in eurozone inflation from 4.3 per cent in September to three per cent in October, its lowest degree since August 2021.
The German figures are due out on October 30, with the numbers for the only foreign money space coming the next day.
Expectations of additional falls in inflation would assist the European Central Financial institution maintain rates of interest unchanged when it meets subsequent Thursday, she mentioned.
The battle between Israel and Hamas has raised fears of wider tensions within the Center East and pushed up oil and gas prices in latest weeks, which economists fear may maintain inflation stubbornly excessive.
Carsten Brzeski, an economist at Dutch financial institution ING, mentioned “the disinflationary course of may nonetheless acquire momentum within the coming months, however seems to be shortlived” as larger oil costs meant “headline inflation would rebound within the first half of 2024”.
Nevertheless, Rakau mentioned the newest German figures highlighted “necessary draw back dangers to subsequent yr’s inflation outlook as items deflation feeds via to customers”.
German power producer costs dropped 35.3 per cent within the yr to September. Costs of intermediate items, resembling metals, wooden and fertiliser, additionally fell 4.2 per cent yr on yr.
However German meals producer costs rose 5.5 per cent and sturdy shopper items costs rose 4.2 per cent. and the costs of many development uncooked supplies surged, resembling a 23 per cent rise in cement costs.