Germany: Price pressure at the upstream levels remains strong – Commerzbank

Data released on Monday showed the Producer Prince Index in Germany jumped to 25% (annual). Analysts at Commerzbank point out prices of energy and intermediate products continued to rise and is being felt in the prices of consumer and capital goods. The numbers indicate that the rise in consumer prices is not expected to level off for the time being according to them. 

Key Quotes: 

“German producer prices keep rising strongly. Compared with the previous month, they increased by a seasonally adjusted 1.9% in January. Although this is not as strong as in December (+4.9%), this is primarily due to the fact that energy prices, which had literally shot up in December, were no longer quite as strong.”

“The January figures thus show that price pressure at the upstream levels remains strong and, if anything, has recently increased once again. This suggests that consumer prices will also continue to rise strongly in the months ahead. We expect inflation in Germany to hover around 5% into the fall. The inflation rate for the euro zone is unlikely to be much lower. This keeps up the pressure on the ECB to normalize its ultra-expansive monetary policy at least somewhat.”