November 20, 2023 16:35 GMT
PPI Still Deflationary, But Negative Base Effects Wearing Off
German October Producer Prices came in broadly in line with forecasts at -11.0% Y/Y (-11.0% Y/Y consensus, -14.7% prior which was an all-time low) and -0.1% M/M (0.0% M/M consensus, -0.2% prior)
- This was the first time since August 2022 that the Y/Y reading was higher than the previous month, with negative base effects from high commodity prices a year earlier beginning to evaporate.
- The main driver for the decrease was energy (-27.9% Y/Y) - ex-energy, producer prices rose by +0.2% Y/Y.
- Intermediate goods prices also declined (-4.6% Y/Y), driven by metals (-11.7% Y/Y), which are energy-heavy in production, and chemical resources (-12.1% Y/Y).
- Categories which saw prices rise Y/Y included non-durable consumer goods (+3.9% Y/Y, driven by higher food prices at +3.7% Y/Y), durable consumer goods (+4.2% Y/Y, with Destatis noting a +4.8% rise in furniture prices) and investment goods (+4.4% Y/Y, driven by machine prices at +5.4% Y/Y).
- A continuing decline in producer prices is a sign that inflationary pressures on consumer prices will also keep ebbing.
- Bund futures saw some brief light support on the release, reversing lower soon after.
- Later this week, we get multiple further indicators of price pressures, including November flash PMIs and the November ifo Barometer.