Tuesday, May 20, 2008

German Producer Prices April 2008

German producer-price inflation, widely considered to be an early indicator of price inflationpressures in the economy, accelerated to the fastest pace in almost two years in April, largely on rising energy costs. Prices for manufactured goods increased 5.2 percent from a year earlier, the most since August 2006, the Federal Statistics Office in Wiesbaden said today.

Adding to cost pressures, German wholesale-price inflation slowed less than economists expected in April to 6.9 percent from 7.1 percent in the previous month. Crude oil prices have gained 33 percent this year, reaching a record $127.82 a barrel on May 16. Energy prices rose 12.6 percent from a year earlier and oil products were 17.8 percent more expensive, the statistics office said. Excluding energy, producer prices rose 2.7 percent.

The European Central Bank on May 8 kept its key interest rate at 4 percent, signaling concern that companies are raising prices and wages. Inflation has been pushed higher by record energy and food prices, constraining consumers' spending power, and todays release shows a continuing price pressure which the ECB will findit very hard to ignore. In addition it is already clear that May will show significant upward pressure on prices simply due to energy prices, so with today's figures, the bad news certainly isn't over yet.

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