German Producer Price Inflation At Record High

German Producer Price Inflation At Record High

Thursday 20th January 2022 – 08:05 (GMT)

The latest readings released by the Statistisches Bundesamt Deutschland have shown producer price inflation in Germany accelerated for the 12th month in a row over December 2021. This pushed the year-on-year figure to a new all-time high of 24.2%, significancy above the 19.2% reading in November and above forecasts of 19.4%.

Soaring energy costs continue to make the biggest upward contribution (prices up 69%), namely the distribution of natural gas (121.9%) and electricity (74.3%). Excluding energy, producer inflation was 10.4%.

This will put further pressure on Germany’s energy regulator who suspended approval of the controversial Nord Stream 2 natural gas pipeline from Russia to Germany last year. It said the pipeline’s operating company needed to be compliant with German law before it would certify the €10bn (£8.4bn) project.

Running under the Baltic Sea, Nord Stream 2 will double Moscow’s gas exports to Germany, but it will also circumvent Ukraine, which relies on existing pipelines for income and would be hard-hit by the loss of transit fees.

German businesses have invested heavily in the 1,225km (760-mile) pipeline and former Chancellor Gerhard Schröder has played a big role in its development. According to reports, construction is now complete and ready to turn on.

GBP/EUR pushed back above €1.20 following the news, whilst EUR/USD remained range-bound between 1.13 and 1.14. Attentions now turn to the upcoming meeting for the European Central Bank with markets watching closely for a response to help quell current climbing inflation across the continent.