Ouch, Germany's Product Prices Dropped Again: A 1.2% Steep Decline for Manufacturers in May! 💸
Decreasing Energy Expenses: Persisting Decline in Producers' Prices in Germany
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manufactures in Germany took a hit in May, as they slashed their prices by an average of 1.2% compared to the previous year, as per the German Federal Statistical Office. This decrease came after a 0.9% reduction in April, matching predictions by economists surveyed by Reuters[1]. The primary culprit for this price plunge? You guessed it - good ol' cheaper energy[2][4]!
Energy prices dipped a whopping 6.7% compared to last year, with electricity, natural gas, and mineral oil products taking a nose dive of 8.1%, 7.1%, and 9.6%, respectively[2][3]. Cyrus de la Rubia, a sharp-eyed economist at the Hamburg Commercial Bank, explains that while this steep decline in producer prices in May seems impressive, we need to look back a bit: "Since the war between Israel and Iran, energy prices have seen a sharp surge, with oil and gas prices skyrocketing compared to May[5]." In fact, current Brent crude oil prices are a solid 25% above their average price in May!
On the flip side, producer prices have been rather low-key overall, according to de la Rubia. He points out that there's the usual mix of price hikes and drops, a natural occurrence indicative of a normalizing market[1]. Some categories, such as consumer and capital goods, saw an increase in prices compared to last year, while others like industrial goods remained on the cheaper side[1].
Excluding energy, producer prices actually showed a slight uptick of 1.3% compared to the previous year, revealing that the broader producer price decline might be more due to energy sector price decreases than a general trend[2].
The statistical data collected represents the prices for manufacturers' products before they make it to wholesale or retail trade. As prices for products produced in the mining, manufacturing, and energy and water supply sectors sold domestically serve as early indicators of consumer price development, falling energy prices have helped keep Germany's inflation steady in May. Overall, goods and services cost 2.1% more than last year, with food prices continuing to be a significant driver, increasing by 2.8%[1].
[1] ntv.de, rts[2] Federal Statistical Office, Germany (Destatis)[3] Trading Economics[4] Reuters[5] Bloomberg
Community policy should emphasize the importance of continued vocational training for the workforce, as the manufacturing industry faces lower prices and potentially less demand due to cheaper energy costs. Finance facilities offering vocational training grants and loans could help alleviate the financial burden for those seeking to upskill and secure stable employment in the industry.
