Rapid Increase in Producer Prices Sets New Record, Up by 37.2 Percent
In recent months, there has been a significant increase in producer prices, with food prices rising by approximately 21 percent and energy costs soaring by substantial margins.
According to data from June 2025, natural gas prices have risen by an astounding 163.8 percent, electricity by 125.4 percent, and mineral oil products by 41.8 percent compared to the same period last year. These increases have also been seen in intermediate goods such as metals, fertilizers, feed, industrial gases, and packaging materials made of wood.
This price surge has resulted in the inflation rate reaching its highest level since the winter of 1973/1974, peaking at 7.9 percent in May. However, the fuel discount and the nine-euro ticket are currently suppressing inflation for consumers, but these state aid measures will expire at the end of the month.
The causes of these price increases are multifaceted. Supply chain disruptions, ongoing challenges amid global logistics constraints and tariffs, have affected producer costs, particularly in transportation and manufacturing goods. Energy and commodity costs, such as fluctuations in oil, natural gas, and key commodity prices, are major factors influencing producer prices. Labor market tightness, with wage increases and labor shortages in key industries, also contribute to higher production costs. Weather and disease impacts on agriculture, including disease outbreaks and adverse weather conditions affecting crop and livestock yields, drive up food-related producer prices.
These inflationary pressures are transmitted downstream, raising consumer prices for food, transportation, and other goods and services. Increased costs for producers reduce profit margins or lead to higher retail prices. Sector-specific impacts are noted, such as higher freight and transportation costs contributing to broad economic cost pressures.
Looking ahead, producer prices are forecasted to grow moderately in 2025. Food-at-home prices are expected to increase by about 2.2 percent, slightly below the 20-year average growth, influenced by trade pattern changes and economic inflation factors. Inflation for core PPI is expected to slow to around 2.7 percent annually, with ongoing moderation in some sectors, though price increases in specific categories like transportation services may persist.
However, uncertainties remain around energy costs, global supply conditions, and geopolitical factors that could cause future volatility in producer prices. Experts predict higher inflation rates in the fall due to the expiration of state aid measures.
It's important to note that prices are recorded from the factory gate - before the products are further processed or enter the market. Energy prices have significantly increased on the producer level, with a 105.0 percent increase in costs compared to July 2021. In July, consumer prices were 7.5 percent higher than the previous year. From June to July, producer prices increased by 5.3 percent, which is also the highest increase compared to the previous month since the beginning of the survey.
In conclusion, while the mid-2020s producer price rises are the largest in some recent months, they do not reach the extreme historical spikes seen in certain past decades. The main drivers are global supply issues, energy prices, and labor market conditions, with moderate inflationary effects expected to continue but at a slowing pace based on current forecasts.
The surge in energy prices, as evidenced by a 105.0 percent increase in costs compared to July 2021, has impacted the industry sector, particularly finance, as higher energy costs can affect the profitability of various companies. Additionally, the increase in prices for intermediate goods such as metals, fertilizers, feed, industrial gases, and packaging materials made of wood, can also have implications for the finance sector, as these increased costs may be passed down to consumers, ultimately impacting overall economic conditions.
