Producer prices in Germany increased by 0.5% year-on-year in January 2025, slowing from December’s 1.5-year high of 0.8% and coming in below market expectations of 1.3%.
German producer prices rise less than estimated
Despite the deceleration, this marked the third consecutive month of producer inflation, primarily driven by higher costs for non-durable consumer goods (3.0%) and durable consumer goods (1.1%). The rise in capital goods prices (1.9%) also contributed to overall inflationary pressures, with machinery (1.9%) and motor vehicles, trailers, and semi-trailers (1.4%) seeing notable price increases.
Prices for intermediate goods edged down slightly
Meanwhile, prices for intermediate goods edged down slightly (-0.1%), indicating weaker cost pressures in the supply chain. Energy prices fell by 1.0%, extending their decline due to lower costs for electricity (-1.8%), natural gas (-1.9%), and district heating (-1.5%), despite a modest 0.7% increase in mineral oil products. Excluding energy, producer prices rose by 1.2%, suggesting that underlying inflation remains relatively firm despite the broader slowdown.
On a monthly basis, the producer price index (PPI) edged down by 0.1% for the second straight month, falling short of market expectations for a 0.6% increase and signaling subdued cost pressures at the start of the year. Over the full year of 2024, factory-gate prices contracted by 1.8%, in contrast to the modest 0.2% increase seen in 2023, reflecting the ongoing effects of easing supply chain disruptions and stabilizing commodity prices.
What to expect
Looking ahead, price trends in Germany’s industrial sector will likely depend on energy market fluctuations, global demand for manufactured goods, and the European Central Bank’s monetary policy stance. While inflationary pressures appear to be moderating, continued geopolitical tensions and potential shifts in input costs could influence producer price movements in the coming months.
