| Consensus | Consensus Range | Actual | Previous | |
| Month over Month | -0.1% | -0.3% to 0.1% | -0.2% | 0.0% |
| Year over Year | -2.4% | -2.8% to -2.1% | -2.5% | -2.3% |
Highlights
Producer price developments in December 2025 signal a clear easing of cost pressures at the factory gate, largely driven by energy market dynamics. Industrial producer prices fell by 2.5 percent year-over-year and declined modestly by 0.2 percent month-over-month, reinforcing the disinflationary trend seen throughout 2025. Energy prices remain the dominant force behind this outcome, with a sharp 9.7 percent annual fall led by steep reductions in natural gas and electricity prices. This energy-driven relief has significantly lowered production costs, particularly for energy-intensive industries.
However, beneath this headline decline lies a more complex picture. Excluding energy, producer prices actually rose by 0.9 percent annually, indicating persistent underlying cost pressures. Capital goods, durable goods and intermediate inputs all recorded price increases, reflecting higher machinery, vehicle and raw material costs. Rising prices for metals, timber and selected food items such as beef and coffee further illustrate ongoing supply-side constraints.
On an annual average basis, producer prices fell by 1.2 percent in 2025, again almost entirely due to cheaper energy. The data suggest that while energy normalisation is easing inflation upstream, structural pressures in goods production remain, limiting the speed at which producer price relief may pass through to consumers. These updates bring the RPI to minus 1 and the RPI-P to 3, meaning that economic activities are now within the expectations of the German economy.
Market Consensus Before Announcement
No letup in wholesale price deflation seen with a decline of 2.4 percent on year expected for December.
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.