21 July 2009

Germany continues its economic decline

In the continuous toll the recession is taking on Germany, energy prices were the main culprit for the 4.6% decline in wholesale prices in the year to June, the biggest annual drop in four decades.

This drop compares with the 3.6% year-on-year fall in May and was the largest since the producer price index declined by 5% in December 1968, the Federal Statistical Office said.

In month-on-month terms, producer prices were down 0.1% in June after standing still in May.

Energy prices were the main factor behind the year-on-year drop, the statistical office said. They were down 8.4% from June 2008, when prices of oil and fuel were at record highs.

Prices for oil products were down more than 24%, while electricity and gas prices were down 5.7% and 3.5% respectively.

Metal prices dropped more than 20%, with the price of rolled steel falling more than 31% as industrial production reduced with weaker demand.

Producer prices for industrial products, a measure of price pressures at the factory gate, are an important gauge of inflation before it reaches consumers. Germany’s annual consumer price inflation rate in June was a minimal 0.1%.

For related information, go to www.isa.org/productivity.