Germany's producer prices slipped by 1.3 percent in June 2025 compared to the same month last year, in line with the consensus and continuing the deflationary trend seen in May (minus 1.2 percent). The main drag was energy, down 6.4 percent year-over-year, led by electricity (minus 8.8 percent) and gas (minus 6.9 percent), despite modest month-over-month increases. Stripping out energy, prices actually rose 1.3 percent, revealing underlying inflationary pressures.

Intermediate goods also recorded annual declines (minus 0.4 percent), particularly metals and chemicals, signalling easing cost pressures for manufacturers. However, prices for capital goods (1.7 percent) and consumer goods (3.6 percent) rose, driven by surging food prices, coffee and beef soared by over 30 percent each. Durable goods followed suit with a 1.7 percent annual increase. This divergence suggests that while energy-led deflation cools headline figures, persistent cost increases in consumer and capital goods may reflect underlying inflation stickiness.

The slight month-over-month increase (0.1 percent) could hint at a turning point, particularly if energy stabilises. In essence, June's updates demonstrate that while producers are witnessing cost reliefs on one hand, lingering inflationary signals are being presented to end consumers on the other, resulting in the RPI rising to 19 and the RPI-P to 24. This means that economic activities continue to stay ahead of market expectations in Germany.

The consensus sees no change on the month in June and a decline of 1.3 percent on year.

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.

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.