Drop in Energy Bills Boosts German Manufacturers: Monthly Producer Prices Decrease in 2025
Decreasing Energy Expenses: Consistently Dropping Producers' Prices in Germany
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The cost of goods produced by manufacturers in Germany saw a decrease in May 2025, marking the third straight month of decline, with an average 1.2% reduction year-on-year, as reported by the Federal Statistical Office. Economists had forecasted a decline of this magnitude, following a 0.9% drop in April. The primary factor behind this decline was the lower energy prices in May, as stated by Destatis [1].
Energy costs themselves dropped by 6.7% compared to last year, with intermediate goods also experiencing a decrease. However, it’s worth noting that the significant decrease in producer prices observed in May may serve as a reflection of the past rather than the present, as Cyrus de la Rubia, chief economist at the Hamburg Commercial Bank, pointed out [1]. He explained that rising energy prices, especially crude oil and natural gas prices, due to the war between Israel and Iran, have significantly increased compared to May. As of now, Brent crude oil is around 25% higher than its average price in May [1].
The price trends for producers have generally been relatively unremarkable, with typical fluctuations between price increases and decreases. Consumer goods and capital goods were more expensive in May, while without considering energy, producer prices increased by 1.3% compared to the previous year [1]. Prices from manufacturers declined by 0.2% from April to May, which was marginally below the experts' forecast of 0.3% [1].
These statistics represent the prices of manufacturers’ products before they reach the wholesale and retail trade. As such, they serve as early indicators of consumer price developments. The steady declines in energy prices have kept inflation in Germany stable in May, with goods and services costing 2.1% more compared to a year ago. Food prices continued to be a significant driver of inflation, increasing by 2.8% again in May [1].
🔗 Source: ntv.de, rts
🔍 Enrichment Data:
- The decline in producer prices in May 2025 was the fastest rate since September 2024 due to significantly lower energy costs, with drops in electricity (-8.1%), natural gas (-7.1%), and mineral oil products (-9.6%) [1].
- Excluding energy, producer prices increased slightly by 1.3%, but this was a smaller rise compared to previous months [1].
- Price rises in other sectors such as non-durable consumer goods, durable consumer goods, and capital goods were observed, with price hikes of 3.6%, 1.6%, and 1.9% respectively, but these increases were outweighed by the significant reduction in energy prices [1].
[1] – Based on data obtained from ntv.de and rts.
In this context, the decline in producer prices could potentially be attributed to the community policy on vocational training in the manufacturing industry, as the reduced energy costs might encourage more investment in advanced vocational training programs to enhance production efficiency. Furthermore, the decrease in energy prices, although a significant factor, should be carefully analyzed in conjunction with finance trends, considering the current increase in crude oil and natural gas prices due to the war between Israel and Iran, which may impact future energy costs.
