German July Producer Prices Decline Biggest Since 1949

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German producer prices dropped at a record pace in July, falling for the fifth month in a row.

The producer price index or PPI plunged 7.8% year-on-year in July, worse than a 4.6% decline in the preceding month, the Federal Statistical Office said. This was the lowest annual rate since the series started in 1949. Economists had expected a decrease of 6.5%. The PPI had grown 8.2% in the same month a year ago.

This was the fifth consecutive month of annual decline in producer prices. In May, the PPI declined 3.6% after a 2.7% fall in April and a 0.5% drop in March.

In July, the producer price decline was mainly due to falling energy prices that decreased 16.5% year-on-year in July. Energy prices fell 4.5% compared to the preceding month.

Producer prices, excluding energy, declined 3.6% year-on-year in July and it was down 0.2% compared to the previous month.

Petroleum products prices fell 28.8% in July, while heating fuel prices plummeted 49.8%. Electricity charges were 10.8% lower than a year ago.

On a monthly basis, the PPI decreased 1.5% in July, after a 0.1% fall in June. Economists were looking for a decline of 0.2%.

Other price indicators are also falling. The consumer price index dropped 0.5% year-over-year in July, the first annual decline since March 1987. The harmonized index of consumer prices for EU purposes dropped 0.7% year-on-year in July.

That said, confidence is improving in the largest Eurozone economy as it unexpectedly exited recession in the second quarter. Gross domestic product rose 0.3% sequentially in the second quarter after declines in previous four quarters.

German producer prices dropped at a record pace in July, falling for the fifth month in a row. (Market News Provided by RTTNews)