Germany's PPI falls at fastest pace since 1949

Inflation looks set to be coming down in Germany after a key indicator — the country's Producer Price Index — tumbled at the fastest rate since 1949.

The index, compiled by the federal statistics office Statistisches Bundesamt, or Destatis, measures average changes in prices received by domestic producers for their output, and is widely seen as a key indicator of future inflation rates.

The latest index, published on Wednesday, showed that year-on-year PPI fell by 12.6 percent last month, the biggest drop since data collection began 74 years ago.

The PPI rate is now close to where it was before the Russia-Ukraine conflict began and huge energy price rises fueled rampant inflation.

RTTNews said the record fall in Germany's PPI last month was faster than the previous month's 6 percent, and in line with economists' expectations.

The sharp downward trend was attributable to energy prices slumping by 31.9 percent during the course of the year, it said, as Germany and the rest of Europe cut their consumption of Russian fossil fuels.

With energy stripped out of PPI, producer prices rose by 1.2 percent year-on-year last month. The price of intermediate goods last month was 4.1 percent lower than a year earlier. In addition, the price of nondurable consumer goods rose by 6.9 percent, Destatis said.

Worrying assessment

Wednesday's good news followed a worrying assessment on Tuesday from the Organization for Economic Cooperation and Development that said Germany will experience a heavy blow from a slowdown in the world economy driven by higher interest rates and weaker global trade.

The OECD said Germany and Argentina are likely to be the only G20 nations with shrinking economies this year.

Despite the mixed messaging, European share value increased on Wednesday, with the pan-European STOXX 600 index gaining 0.4 percent in early trading.

German lender Commerzbank saw its shares grow by 1.2 percent after its finance chief said the institution expects to earn net interest income of $8.5 billion this year.

The United Kingdom's export-oriented FTSE 100 Index gained 0.6 percent after the country's annual Consumer Price Index fell last month, making further Bank of England interest rates less likely.

Nick Rees, FX market analyst at Monex Europe, told Reuters: "Despite the progress on disinflation, however, this latest CPI data is probably not enough to call an end to policy tightening."

The United Kingdom's CPI fell to 6.7 percent last month, from 6.8 percent in July.

Rees said European central banks will want to make sure recent promising signs about inflation are not anomalies, but will be sustained before holding off on interest rate hikes.