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Germany’s producer price inflation is following the path of consumer prices in Europe’s largest economy – hitting a five-year high in February.

Annual producer price inflation – which measures cost pressures faced by German manufacturers – leapt from 2.4 per cent to 3.1 per cent last month, the highest since November 2011. The reading came in just below an average forecast of 3.2 per cent compiled by Reuters.

Inflation was pushed up by the climbing cost of energy last month, which was 5.4 per cent more expensive compared to February 2016, according to stats office Destatis.

Higher producer price inflation follows in the wake of a faster than expected riser in Germany’s closely-watched consumer price inflation which hit 2.2 per cent last month - a 2012 high and above the European Central Bank’s target of just below 2 per cent.

Producer price are a good early measure of inflationary pressures building in an economy as firms are likely to pass on higher prices to customers.

Copyright The Financial Times Limited 2017. All rights reserved.

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