German manufacturers once again increased their prices at a record pace in May as a result of the war in Ukraine. Producer prices rose by an average of 33.6 percent. "This was the highest year-on-year increase since the survey began in 1949," the Federal Statistical Office said Monday. "This means that commercial producer prices have recorded new record increases every month since December 2021." Economists polled by Reuters had expected the figure to remain unchanged at 33.5 percent. From April to May alone, producer prices were up 1.6 percent.

These are considered a precursor to the development of general inflation. In the statistics, prices are recorded ex-factory gate - even before the products are further processed or go on sale. Currently, the inflation rate of 7.9 percent is already higher than it has been since the winter of 1973/1974.

"So far, companies have probably only partially passed on the massive increase in producer prices to end consumers," commented Commerzbank economist Ralph Solveen. That is why the underlying momentum for consumer prices is also likely to remain at least very high, and possibly even increase somewhat, he expects.

Once again, the main reason for the rise in producer prices is energy, which has cost considerably more since the beginning of the Russian invasion of Ukraine on February 24. Here, producer prices were 87.1 percent higher than in May 2021, with natural gas increasing in price by 148.1 percent. Power plants paid 241.2 percent more for natural gas than a year earlier, industrial consumers 210.7 percent and resellers 168.3 percent more. Petroleum products cost 55.8 percent more than a year earlier. Light heating oil was almost twice as expensive, while fuels were 49.4 percent more expensive.

There were also high price increases for intermediate goods, particularly metals, fertilizers and feedstuffs, industrial gases and wooden packaging materials. Foodstuffs increased in price by 19.2 percent. Prices for butter (+80.2 percent), untreated vegetable oils (+68.4), beef (+42.9), coffee (+33.6) and milk and milk products (+24.1) rose particularly sharply.

Photo by Ehud Neuhaus