German April Producer-Price Inflation Accelerates
German producer-price inflation, an early indicator of price pressures in the economy, accelerated to the fastest pace in almost two years in April on energy costs.
Prices for goods from newsprint to plastics increased 5.2 percent from a year earlier, the most since August 2006, the Federal Statistics Office in Wiesbaden said today. Economists expected a 4.7 percent gain, the median of 34 estimates in a Bloomberg News survey shows. Prices rose 1.1 percent from March.
The European Central Bank on May 8 kept its key interest rate at 4 percent, signaling concern that companies are raising prices and wages. Inflation has been pushed higher by record energy and food prices, crimping consumers' spending power and clouding the growth outlook in Europe's largest economy.
Toady's release “shows a certain price pressure, which the ECB can't ignore,'' said Rainer Guntermann, an economist at Dresdner Kleinwort in Frankfurt. “It's already clear that May will show significant upward pressures because of energy prices. With today's figures, the bad news isn't yet over.''
Adding to cost pressures, German wholesale-price inflation slowed less than economists expected in April to 6.9 percent from 7.1 percent in the previous month. Crude oil prices have gained 33 percent this year, reaching a record $127.82 a barrel on May 16.
`Strong' Price Gains
Energy prices rose 12.6 percent from a year earlier and oil products were 17.8 percent more expensive, the statistics office said. Excluding energy, producer prices rose 2.7 percent.
Lanxess AG, the world's second-largest maker of butyl rubber used in tires, on May 14 reported a first-quarter profit that beat analyst estimates on higher prices free credit report instantly cashadvance.com. The Leverkusen, Germany-based company predicted a “strong'' increase in raw-material prices.
The euro's 6.7 percent gain against the dollar this year is helping soften inflation pressures by making imports cheaper. German import-price inflation slowed to 5.7 percent in March from 5.9 percent in the previous month.
The ECB has kept interest rates at a six-year high even as the Federal Reserve and the Bank of England cut borrowing costs to counter an economic slowdown. ECB council member Klaus Liebscher said in an interview on May 15 that the Frankfurt-based bank has to “do everything'' to avoid so-called second-round effects.
In Germany, the Ver.di labor union is seeking 8 percent more pay for its 420,000 members in private, mortgage and public-sector banks. That's more than triple the country's current inflation rate of 2.6 percent.
Still, with the economy losing momentum, companies may find it more difficult to raise wages and prices in coming months. German business confidence probably declined for a second month in May, a Bloomberg survey shows. The Munich-based Ifo institute will release the report tomorrow.
“The situation will remain uncomfortable for another while,'' said Jens Kramer, an economist at Norddeutsche Landesbank in Hanover. “But I don't see an inflation spiral in Germany.''