German Manufacturers See Lower Energy Costs: Producer Prices Continue Their Downslide 📉🇩🇪
Decreasing energy expenses: Persistently decreasing producer prices in Germany
In a welcomed trend, German manufacturers continue to experience a decrease in producer prices, marking the third consecutive month of decline. Data from the Federal Statistical Office shows that in May 2025, producers of various goods—from food to industrial items—saw an average decrease of 1.2% compared to the same period last year [1][2]. Economists had anticipated this decline, following a 0.9% drop in April.
The main culprit for this continued price decrease can largely be attributed to significantly lower energy prices. Energy costs were 6.7% cheaper in May compared to the previous year [1][4]. Specifically, electricity prices fell by 8.1%, natural gas prices dropped by 7.1%, and mineral oil products prices declined by 9.6% [1][4].
According to Cyrus de la Rubia, chief economist at the Hamburg Commercial Bank, this significant decline in producer prices observed in May is primarily a rearview mirror effect. With the escalating war between Israel and Iran, energy prices—especially oil and gas prices—have surged sharply compared to May [1]. Current Brent crude oil prices are approximately 25% higher than their average price in May, a surge that is bound to be reflected in overall energy prices in the coming month.
Producer prices have generally behaved in a rather ordinary manner, with the usual mix of price increases and decreases, according to the expert. Excluding energy, consumer and capital goods, as well as investment goods, were more expensive in May compared to the previous year [1]. Prices for these categories saw a 1.3% increase year-on-year, slightly easing from a 1.5% rise the previous month. This indicates that, without the energy sector's contribution, producer prices would have been on a more stable course [1].
It is worth noting that without considering energy prices, producer prices still rose by 1.3% year-on-year in May, albeit at a slightly slower pace than the previous month, suggesting that the energy sector was the main contributor to the overall drop in producer prices [1].
The statistics provided by the Federal Statistical Office represent the prices charged by manufacturers for their products before they reach the wholesale and retail trade. These prices serve as early indicators of the development of consumer prices. The drop in energy prices has helped keep inflation in Germany stable in May, with goods and services costing 2.1% more than the same period last year [1]. Food prices, in particular, remained a driver of inflation, increasing by 2.8% once again in May.
source: ntv.de, rts
Insight:
- The energy sector has been the main contributor to the drop in producer prices in Germany, with prices for electricity, natural gas, and mineral oil products falling significantly year-on-year [1][4].
- Energy costs are a substantial input cost for many industries, and the decline in these costs has contributed to the overall 1.2% decrease in producer prices [1].
- Excluding energy prices, however, producer prices saw a slight increase, indicating a more stable trend [1].
The community might consider implementing a policy to allocate funds towards vocational training programs, given the demonstrated impact of cheaper energy costs on business profits. Such training could empower workers with new skills to capitalize on the current economic climate and may lead to improved business productivity and growth.
As businesses potentially navigate lower costs in the near future, it's crucial to assess the financial implications of this situation and ensure that vocational training programs are adequately funded to fully leverage the opportunities presented by the current economic circumstances.
