# Record jump in German producer prices adds to gloomy outlook Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-08-19 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: German Producer Prices Surge 37.2% - Record Rise Amid Meta Description: German producer prices soared 37.2% in July, the fastest rise since 1949, as energy costs skyrocket. The outlook is gloomy with high uncertainty. URL: https://financedigest.com/record-jump-in-german-producer-prices-adds-to-gloomy-outlookhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-08-18t220719z2lynxmpei7h10trtroptp4germany-frankfurt-ecb-1736815420715-compressed.jpg) By Miranda Murray and Paul Carrel BERLIN (Reuters) -German producer prices jumped at the fastest pace on record in July, underscoring the gloomy outlook for Europe’s largest economy, which is stuck in a stranglehold of soaring costs and weakening growth due to the Ukraine war. Producer prices — a leading indicator for inflation — surged 37.2% on the year, the biggest rise since records began in 1949, the federal statistics office said on Friday. The month-on-month rise, 5.3%, was also the [highest on record](https://www.financedigest.com/uk-inflation-hits-40-year-record-highest-in-g7.html "UK inflation hits 40-year record, highest in G7"). The outlook for the further development (of the economy) is currently noticeably gloomy,” the finance [ministry said in its August monthly report](https://www.financedigest.com/german-economy-expected-to-skirt-recession-economy-ministry-report.html "German economy expected to skirt recession – economy ministry report"), published on Friday, adding that it was marked by “a high degree of uncertainty. The [record increases in producer prices](https://www.financedigest.com/tesla-posts-record-quarterly-deliveries-after-price-cuts-up-4-from-q4.html "Tesla posts record quarterly deliveries after price cuts, up 4% from Q4") were primarily driven by skyrocketing energy prices, which as a whole were up 105% compared with the same month last year, the office said. The [German economy stagnated in the second quarter](https://www.financedigest.com/german-gdp-contracted-by-0-4-in-the-fourth-quarter.html "German GDP contracted by 0.4% in the fourth quarter"), with the war in Ukraine, soaring energy prices, the COVID-19 pandemic and supply disruptions bringing it to the edge of a downturn. The significantly lower gas supplies from Russia, the persistently high [price increases](https://www.financedigest.com/syngenta-4q-profit-falls-as-raw-material-prices-increase.html "Syngenta 4Q profit falls as raw material prices increase") for energy and, increasingly, other goods, as well as the longer-than-expected supply chain disruptions, also in connection with China’s zero-COVID policy, are weighing heavily on the economy’s development,” the finance ministry said. Feeding into already high energy costs, the [German government will impose levies](https://www.financedigest.com/funds-from-electricity-levy-could-help-german-households-says-renewables-association.html "Funds from electricity levy could help German households, says renewables association") on gas consumers from Oct. 1 that will add several hundred euros to the average family’s annual [energy bill](https://www.financedigest.com/energy-bill-support-pushes-uk-budget-deficit-to-february-record.html "Energy bill support pushes UK budget deficit to February record"). To cushion the blow, [sales taxes](https://www.financedigest.com/germany-to-lower-sales-tax-on-gas-to-7-in-bid-to-relieve-consumers.html "Germany to lower sales tax on gas to 7% in bid to relieve consumers") on gas are set to be reduced to 7% from 19% while the levies are in place. Higher energy [prices mean inflation](https://www.financedigest.com/euro-zone-inflation-eases-in-feb-but-core-prices-pick-up.html "Euro zone inflation eases in Feb but core prices pick up") is unlikely to cool off anytime soon: Germany’s annual inflation rate in July was 8.5%, in line with the wider euro zone’s record rate of 8.9%. Experts [expect German](https://www.financedigest.com/german-industrial-orders-rise-more-than-expected-in-february.html "German industrial orders rise more than expected in February") inflation could reach around 9% following the expiration of relief measures, including cheaper public transport and a fuel tax cut, at the end of August. That is when inflation is likely to reach its peak, said Commerzbank economist Ralph Solveen. However, wage rises [expected next year will likely continue to buoy rates](https://www.financedigest.com/ecbs-makhlouf-expects-50-bps-rate-hike-in-december.html "ECB’s Makhlouf expects 50 bps rate hike in December"), “and companies are likely to pass these costs on to their customers. The [German government in April forecast 2022 inflation](https://www.financedigest.com/german-inflation-rate-to-ease-over-course-of-2023-econ-minister.html "German inflation rate to ease over course of 2023 – econ minister") at 6.1%. It will present updated economic projections on Oct. 12, the finance ministry said. (Additional reporting by Rene WagnerWriting by Paul Carrel and Miranda MurrayEditing by Madeline Chambers, Toby Chopra and Kim Coghill) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---