Inflation and Record Prices

Commercial product production prices rose by 25.9 per cent on average in February compared to the same month last year. This was the highest growth since the beginning of measurements in 1949,” spoke to the Federal Statistics Office on Monday.

Production prices are seen as a forerunner of inflation development. Statistics mark the prices of products from the factory gate so that even before products are processed or sold further.

According to the statistics, energy is still the main reason for the high rise in production prices. Energy prices have increased in February by an average of 68 per cent. Natural gas has cost 125.4 per cent more than February 2021. Electricity and heating oil have increased by 56.9 per cent.

War in Ukraine

If the energy price increase is not included, then production prices have increased by about 12.4 per cent more than a year ago. Food prices have increased by 9.2 per cent. Plant oil prices have increased by 50.1 per cent, butter by 64.4 per cent, and cafe 16.9 per cent. High growth has also been involved in metals, garbage, and wooden ambals.

The current price developments have not included the consequences of Russia's aggression against Ukraine”, statistics authorities say. The estimates of these prices are on February 15th, before the start of the war.

Since the Russian attack in Ukraine on February 24, 2022, energy, waste and food prices such as wheat and sunflower oil have continued to rise, with devastating consequences in particular for developing countries, reports DW.

Builder Missing Things

In view of war and war - related sanctions, the German construction industry even warned that construction can be achieved to the end of construction in Germany. “We cannot say for sure today whether there will be enough material for all construction plants in Germany”, the general manager of the German Construction Industry's main association (HDB), Tim Oliver Müller, said on Friday.

Meanwhile, shipments of basics such as nails or screws, which are missing due to sanctions, have also been interrupted. As a result of the war, the last few days have seen great increases in prices in steel, aluminum, and the first bitumen that is required for the production of asphalt.

So material suppliers no longer make any binding offers for these materials. In some cases, prices are guaranteed in just a few hours. Therefore, it is impossible to calculate and submit bids as before,” says Müller.

Touched by Nearly All

Most German companies are now observing the effects of war in Ukraine directly or indirectly. In a survey by the German Chamber of Industry and Trade (DIHK), for which 3,700 companies were surveyed last week, 78 per cent of them claimed they were affected by the war. Only 22 per cent have so far felt no consequences of the war and sanctions imposed on Russia.

Results for industry are particularly alarming, said general director DIHK, Martin Wonsleben. Two out of three German companies claim they are obliged to bill prices to customers. “Here has an additional inflation potential.” Three-quarters of industrial companies have problems in logistics and in supply chains, almost 90 per cent report lack of raw materials and preliminary products. Important imports from Russia to the German industry include aluminum, niklin and titan.

According to a survey in the metal and electrical industry, 69 per cent of all companies expect cost increases, and almost half of them expect apparent losses in sales and profits, the Gesammetall Employers' Association reports.

The fall greater than the pandemic?

The association's chief executive, Oliver Zander, warned by the ban on buying Russian oil and gas in order for Russia to be damaged and solidarity shown with Ukraine. “Stopping the purchase of Russian oil and gas would be accompanied by obstacles to the supply of the hardest type and would not be economically sustainable”, Zander said. Many jobs would be lost. “We may already assume that the current situation and current sanctions will lead to an economic downturn that will approach Corona, but maybe even exceed it. ”

Keel Institute for World Economics ( IfW) does not expect prices to normalise at the moment. The inflation mark this year, with about 5.8 per cent, could be higher than ever before in reunified Germany,” says the current forecast. If gas prices rise by 50 per cent compared to a year ago, it could also be an inflation rate of more than six per cent.

On the other hand, IfW has significantly reduced its forecast for economic growth in Germany, as well as other major institutions.