Producer Prices Deflation Reflected in Inflation Breadth Metrics

German December Producer Prices fell faster than expected at -8.6% Y/Y (vs -8.0% Y/Y cons, -7.9% Y/Y prior) and -1.2% M/M (vs -0.4% cons, -0.5% prior).

• The main driver for the decrease in prices on a yearly basis, as expected, continues to be energy (-23.5% Y/Y vs -21.4% prior), ex-energy, producer prices increased by +0.3% Y/Y (the same as in November).
• Intermediate goods prices decreased -3.7% Y/Y (vs -4.1% prior), driven by metals (-9.4% Y/Y vs -10.5% prior) and chemical resources (-10.4% Y/Y). Durable goods prices ticked up +3.0% Y/Y (+4.0% Y/Y prior).
• Consumption goods inflated +3.2% Y/Y (vs +3.7% Y/Y prior), driven by higher food prices (+2.8% Y/Y), and investment goods prices +3.9% Y/Y (vs +4.2% prior). The latter was driven by higher machine (+4.7% Y/Y vs +4.9% prior) and vehicle (+3.4% Y/Y vs +3.7% prior) prices.
• The overall deflation is well represented in MNI’s inflation breadth tracker with the number of item categories printing below 2% Y/Y at 44.3% (vs 41.1% prior and the highest since July 2021) and the number of item categories printing above 6% Y/Y at 21.8% Y/Y (vs 23.9% prior, down from a peak of 81.4% in Sep/Oct 2021 and the lowest proportion since June 2021).
• The continuation of the fall in intermediate goods prices suggests further disinflation is making its way through the production pipeline, however, the deflation in this category is tapering off.

MNI, Destatis