Significant price decline: Energy cheaper, food more expensive - Current development of producer prices in Germany

Significant price decline: Energy cheaper, food more expensive - Current development of producer prices in Germany

According to a report by www.tagesschau.de,

Producer prices in Germany fell significantly at the end of 2023. Energy in particular became cheaper, while food, especially sugar and potatoes, became more expensive. In December, producer prices fell 8.6 percent year-on-year, a sharper decline than the previous month. In 2023 as a whole, producer prices were 2.4 percent lower than in the previous year. In particular, price declines were recorded for energy and intermediate goods. According to the information, energy was 23.5 percent cheaper than a year before.

At the same time, food prices rose by an average of 2.8 percent. Sugar and processed potatoes in particular rose in price by 10.5 and 13.5 percent, respectively. The general development of producer prices also tends to affect consumer prices, which in turn can have an impact on the monetary policy of the European Central Bank (ECB). Due to high inflation, the ECB has raised its key interest rates significantly, but has not changed them in recent months.

Across the EU, food price increases have become significantly slower compared to previous years. On average, prices for agricultural goods rose by two percent last year compared to 24 percent between 2021 and 2022. However, there are big differences depending on the product, such as olive oil, which became 54 percent more expensive, and grains, which became cheaper.

Based on this information, it can be stated that the development of producer prices in Germany and across the EU are important indicators of inflation and possible monetary policy measures. Energy price cuts could help stabilize consumer prices, while increases in food prices could potentially lead to higher inflation. For the financial sector, this means that it should prepare for possible adjustments to monetary policy depending on how prices and inflation develop.