Annual producer price inflation in Germany topped 30% in March, the country’s Federal Statistical Office said on Wednesday. This is its highest level since the agency began collecting data 73 years ago.
The biggest culprit? Energy prices, which are up nearly 84% from the same month last year.
“The main causes of the sharp rise in energy prices are the sharp increases in natural gas prices…which have been [up] 144.8% in March 2021”, the statistics office said in a statement.
This is one of the first signs of the huge impact The Russian invasion of Ukraine is having on the German economy, The biggest in Europe. Producer prices increased by almost 5% between February and March.
Consumers should be prepared. Factory gate inflation is feeding into retail prices, and shoppers can expect to spend more on everything from furniture to meat, Wednesday’s figures showed.
German consumer price inflation is already at a 41 years tall, reaching 7.3% last month. Energy prices were the main contributor, up nearly 40% from the previous month.
World energy prices were rising before Russian President Vladimir Putin ordered the invasion. As economies began to reopen from their pandemic shutdowns, demand for fuel surged and wholesale price exploded.
Germany has so far resisted a natural gas embargo, and with good reason. According to the International Energy Agency, the country depends on Russia for about 46% of its consumption. A sudden break with its biggest supplier would probably result in trigger rationing and inflict severe damage on its energy-intensive manufacturing sector.
Economy Minister Robert Habeck has already warned the Germans that they “will be poorer” because of the war.
“It is not possible for this to end without cost to German society, it is unthinkable,” he said last month.
The price spike has rattled a country that has long boasted of a stable economy and still harbors a deep-rooted fear of the kind of hyperinflation of the 1920s and 1930s that is widely credited with helping the Nazi Party rise to power.
The European Central Bank has interest rates not raised yet tame the price spiral, unlike its counterparts in the US and UK, and has resisted calls to specify a date when it will.
ECB President Christine Lagarde said last week she had to keep her options open, given the uncertain outlook for the region’s economy, and reiterated that the bank would not raise the cost of borrowing only after it ends its purchases of government bonds at some point. third quarter.
A German manufacturer, Henkel
(HENKY), announced on Wednesday that it would cease operations in Russia. The $25 billion chemicals and consumer goods giant said it would continue to pay its 2,500 workers in the country. The detergent manufacturer Persil did not specify the financial impact of its exit.
— Mitchell McCluskey contributed reporting.