Industrial producer prices fell by 1.5 percent compared with July 2024, marking a sharper decline than June's 1.3 percent. On a monthly basis, it fell by 0.1 percent, diverging from the consensus forecast of 0.1 percent. Energy was the key driver, with prices down 6.8 percent year-over-year, particularly natural gas (minus 8.6 percent), electricity (minus 7.8 percent), and mineral oil products (minus 7.9 percent). Yet, excluding energy, producer prices rose by 1.0 percent, underlining the uneven distribution of price pressures across sectors.

Intermediate goods became cheaper (minus 0.9 percent year-over-year), led by declines in basic chemicals, metals, and animal feeds, reflecting weaker demand and softer input costs. In contrast, consumer-facing categories recorded solid gains. Non-durable consumer goods were up 3.5 percent, with sharp increases in food prices including coffee (38.4 percent) and beef (38.0 percent), though, sugar (minus 39.5 percent) and pork (minus 3.9 percent) offered relief. Durable consumer goods rose 1.9 percent, while capital goods climbed 1.8 percent, signalling continued resilience in machinery and vehicle production.

The latest updates suggest that while industrial cost burdens are easing, households and businesses still face inflationary pressures in everyday essentials and equipment, taking the RPI to minus 10 and the RPI-P to minus 26. This means that economic activities, adjusted for prices are now below the expectations of the German economy.

Wholesale prices are seen up 0.1 percent again on the month in July after rising 0.1 percent in June.

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.