| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Month over Month | -0.3% | -0.4% to 0.1% | -0.5% | 0.2% |
| Year over Year | -1.2% | -1.2% to -0.8% | -1.4% | -0.8% |
Highlights
September producer prices fell a steeper than expected 0.5 percent on the month, reducing the yearly inflation rate from minus 0.8 percent to minus 1.4 percent.
Intermediates declined 0.2 percent versus August while capital goods and consumer durables were flat. Non-durable consumer goods were up 0.2 percent. Consequently, its was energy (minus 1.5 percent) that did much of the work and excluding this sector, core prices dipped 0.1 percent leaving the annual underlying rate unchanged at 1.2 percent.
In sum, the data show still subdued pipeline price pressures in manufacturing, in keeping with sluggish demand and output. Today's update puts the German RPI at 10 and the RPI-P at 19, both measures showing overall economic activity running a little ahead of market expectations.
Intermediates declined 0.2 percent versus August while capital goods and consumer durables were flat. Non-durable consumer goods were up 0.2 percent. Consequently, its was energy (minus 1.5 percent) that did much of the work and excluding this sector, core prices dipped 0.1 percent leaving the annual underlying rate unchanged at 1.2 percent.
In sum, the data show still subdued pipeline price pressures in manufacturing, in keeping with sluggish demand and output. Today's update puts the German RPI at 10 and the RPI-P at 19, both measures showing overall economic activity running a little ahead of market expectations.
Market Consensus Before Announcement
After rising 0.2 percent in August, Germany's producer price index is estimated to drop 0.3 percent month over month. Year over year it is expected to decline further from August's 0.8 percent to 1.2 percent.
Definition
The Producer Price Index (PPI) measures the price of industrial and commercial goods produced and sold domestically (excluding turnover tax). About 1,250 types of goods are used to calculate the index and prices are reported by a total of 5,000 enterprises under fixed contractual conditions. Changes in the index provide a guide to inflation from the point of view of the product's producer/manufacturer and, in contrast to the consumer price index (CPI), excludes VAT and other deductible taxed associated with turnover.
Description
The PPI measures prices at the producer level before they are passed along to consumers. Since the producer price index measures prices of consumer goods and capital equipment, a portion of the inflation at the producer level gets passed through to the consumer price index (CPI).
Because the index of producer prices measures price changes at an early stage in the economic process, it can serve as an indicator of future inflation trends. The producer price index and its sub-indexes are often used in business contracts for the adjustment of recurring payments. They also are used to deflate other values of economic statistics like the production index. It should be noted that the PPI excludes construction. These price statistics cover both the sales of industrial products to domestic buyers at different stages in the economic process and the sales between industrial enterprises.
The PPI provides a key measure of inflation alongside the consumer price indexes and GDP deflators. The PPI is considered a precursor of both consumer price inflation and profits. If the prices paid to manufacturers increase, businesses are faced with either charging higher prices or they taking a cut in profits. The ability to pass along price increases depends on the strength and competitiveness of the marketplace.
The bond market rallies when the PPI decreases or posts only small increases, but bond prices fall when the PPI posts larger-than-expected gains. The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
Because the index of producer prices measures price changes at an early stage in the economic process, it can serve as an indicator of future inflation trends. The producer price index and its sub-indexes are often used in business contracts for the adjustment of recurring payments. They also are used to deflate other values of economic statistics like the production index. It should be noted that the PPI excludes construction. These price statistics cover both the sales of industrial products to domestic buyers at different stages in the economic process and the sales between industrial enterprises.
The PPI provides a key measure of inflation alongside the consumer price indexes and GDP deflators. The PPI is considered a precursor of both consumer price inflation and profits. If the prices paid to manufacturers increase, businesses are faced with either charging higher prices or they taking a cut in profits. The ability to pass along price increases depends on the strength and competitiveness of the marketplace.
The bond market rallies when the PPI decreases or posts only small increases, but bond prices fall when the PPI posts larger-than-expected gains. The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
