Wednesday, February 20, 2008

German Producer Prices January 2008

German producer prices rose at the fastest annual pace in 13 months in January, underlining European Central Bank concern that inflation is accelerating. Prices for goods from newsprint to plastics jumped 3.3 percent from the same month a year earlier, compared with 2.5 percent in December, the Federal Statistics Office in Wiesbaden said today. The month on month increase in January was 0.8%.

Evidence that companies are passing on higher costs has raised concern among ECB policy makers of an inflation spiral, such as demands for higher pay to compensate for rising prices. ``The pricing power of firms, notably in market segments with low competition, could be stronger than expected,'' ECB President Jean-Claude Trichet said Feb. 7.

So basically the most important impact of this rise in producer prices is likely to be on the policy making process at the ECB.

The price of oil has surged 71 percent in the last 12 months, reaching a record $100.10 a barrel yesterday in trading on the New York Mercantile Exchange and pushing German inflation to 3 percent last month.

Oil products gained 18.7 percent from a year earlier, the cost of gasoline was up 11.8 percent, today's report showed, heavy heating oil surged 47 percent. Producer prices excluding energy rose 2.5 percent in January 2008 from January 2007.

German consumer confidence held near a two-year low in February as inflation reduced households' spending power.

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