German Producer Prices Fall At a Record Pace in July
Producer prices in Germany plunged 1.5% in July amid expectations for a 0.2% drop from the previous month, while the annualized rate slumped 7.8% from the previous year to mark the biggest since recordkeeping began in 1949. The breakdown of the report showed energy prices fell 4.5% from June, with the cost of heating oil tumbling 8.4% to lead the decline, while prices for basic goods slumped 0.3% during the month. The data reinforces a weakening outlook for inflation as the European Central Bank anticipates price growth to fall negative in the second-half of the year, and price pressures are likely to hold below the central bank’s 2% target for inflation as growth prospects remain subdued. Nevertheless, as ECB President Trichet holds an improve outlook for future growth and sees inflation expectations well anchored, the central bank is likely to hold a neutral policy stance going forward as policymakers anticipate economic activity to improve throughout the year.