Analysing The Political Economy

Inflation: If You Think It's Bad Here - Look At Germany

The UK is being rocked by a steady stream of bad data signalling an oncoming recession and probably a period of stagflation. But if you think the latest 9 per cent inflation number announced by the Bank of England was bad, then just take a look at Germany.

Today, it is announced that German industrial goods producer prices rose by an eye-watering 33.5 per cent in the year to April.

And whilst consumer confidence in the UK is now it’s lowest since records began in 1974 – Germany has already set a new record of inflation thanks to very sharp increases in energy, metals and food prices.

These figures, bad as they are prompted German economists to predict price inflation for consumers would actually keep rising as well.

The 33.5 per cent annual increase in German producer prices was the highest since records started in 1949 and up from 30.9 per cent in March, according to data published by the federal statistical agency.

Part of the problem for Germany is that it is an export-led economy where manufacturing drives most of its GDP. These figures reflect how German manufacturers are fighting against soaring energy and commodity prices as well as the constantly growing supply bottlenecks caused by the war in Ukraine and more recently Chinese Covid lockdowns.

For Germany, things are not looking that good going forward. It is the latest indicator of the increasing upward pressures on consumer prices. Berlin now has to wean itself off its reliance on Russian energy supplies, which will be costly. German energy producer prices rose 87 per cent in the year to April, while power plants had to pay 400 per cent more for energy supplies.

In Germany, Metal prices rose more than 43 per cent, crude vegetable oil prices were up more than 70 per cent, while fertiliser and nitrogen compound prices more than doubled, as did newsprint prices.



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