The Daily Telegraph
German factories suffer record price shock as Moscow cuts off gas
‘Bundesbank warned of mounting signs of a recession with a clear, and longerlasting decline in output’
‘Germany’s inflation is shocking and increases the likelihood of further strong policy moves from the ECB’
GERMAN factories suffered their biggest price shock since records began last month, as the throttling of gas supplies from Russia led energy bills to more than double.
Prices of industrial products jumped by almost 46pc over the past year, according to the Federal Statistical Office, which is the biggest ever increase on records dating back to 1949 when Germany was divided and recovering from the Second World War.
Energy bills reported by businesses surged by 139pc on the year, and increased by more than one fifth between July and August alone.
Electricity prices almost tripled, jumping by 175pc, with redistributors reporting a leap of almost 280pc in the prices they face.
Natural gas distribution rose more than threefold, up 209pc on the year.
The surge came as Russia choked off energy supplies to Germany.
Flows through the Nordstream 1 pipeline were reduced in July before being shut indefinitely at the end of August, with Vladimir Putin, the Russian president, saying gas trade would restart if sanctions were lifted. The selfimposed embargo, combined with sanctions on Russian oil, has forced Moscow to find alternative buyers for its fossil fuels. Data showed China spent a record $8.3bn (£7.3bn) last month on Russian fuel, including a record amount of coal.
Germany has been forced to source energy elsewhere, at higher costs, and Berlin has stumped up another €2.5bn (£2.2bn) of credit lines to help suppliers buy liquefied natural gas. At the same time the German government is nationalising gas importer Uniper, which ran into trouble as prices spiked.
The latest €8bn injection of funds will give Berlin a more than 90pc stake in the business and take the total bill for rescuing the company to around €29bn. Continued soaring inflation represents a growing threat to a German economy that may already be in recession.
The Bundesbank recently warned of “mounting signs of a recession” with “a clear, broad-based and longer-lasting decline in economic output”.
Jane Foley, at Rabobank, said Germany’s producer price inflation was “shocking” and increased “the likelihood of further strong policy moves from the ECB going forward”.
The European Central Bank has already raised interest rates from minus 0.5pc to 0.75pc in a matter of months to combat inflation. The US Federal Reserve and Bank of England are both expected to announce large rate rises later this week.
In Germany, energy costs are combining with other supply shortages to spread inflation through the economy. Intermediate goods – typically components supplied by one manufacturer to another factory, for further processing or assembly – cost 17.5pc more last month than they did in August 2021.
This is hitting households, with a trip to the supermarket costing one fifth more than it did a year ago.