Germany: fourth month of decline in wholesale prices. How long can deflation continue?
In Germany, the winter of industrial prices has arrived early. Wholesale prices in Germany fell for the sixth consecutive period by 4.1% year-on-year in September 2023, following a 2.7% decline in August .
It was the largest drop since May 2020 , attributed to a base effect resulting from the previous year's high price increase due to the war in Ukraine. Prices were sharply reduced for petroleum products (-19.8%), waste and scrap (-22.7%), cereals, unprocessed tobacco, seeds and feed (-21.9%), chemical products (-20.8%) and metals and metallic minerals (-14.9%).
On the other hand, costs increased for fruit and vegetables (19.7%), sugar, sweets and baked goods (13.4%), live animals (10.5%) and drinks (8.4%). On a monthly basis, wholesale prices grew 0.2%, the same pace as the previous month.
Here is the relevant graph:
Of course, the price of energy has dropped, but such a drop in wholesale prices is clearly linked to market factors, i.e. the lack of demand. In the next few days we will see retail sales data from Germany and we must expect the previous negative trend to continue.
A trend of this kind on retail sales can only have a depressive effect on wholesale prices, with a relative compression of commercial margins. Obviously the compression of commercial profits cannot continue for long without putting companies into crisis. In the end, by cutting prices, you end up going bankrupt.
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The article Germany: fourth month of decline in wholesale prices. How long can deflation continue? comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/germania-quarto-mese-di-calo-dei-prezzi-allingrosso-fino-a-quanto-puo-continuare-la-deflazione/ on Mon, 16 Oct 2023 10:00:05 +0000.