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Reflections #32 - Germany PPI slows to 1% YOY

German producer price inflation slows to 1% yoy, lower than the consensus expectation of 1.7% yoy. The month-over-month number showed a negative -1.4% supporting the notion that inflation pressure at the factory gates slows sharply.

This also be good news for consumer price inflation which still hovers over 6%.

One should be cautious, however, to celebrate the slowdown in inflation prematurely.

First, the swings in PPI use to be much bigger than in the CPI. PPI is only moving back into the usual range and it needs more for a sustainable impact (see chart).

Second, a recent survey shows that the perceived inflation is at 18% in Germany more than triple the official inflation number and perception influences consumer behaviour source: (

Bottom line, although the slowdown is welcome there is still a long way to go to put the inflation genie back into the bottle.


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