- Aline Schuiling, senior economist at ABN Amro Bank NV
Producer prices in Europe's largest economy declined unexpectedly in July, raising concerns the recovery is still fragile and unsustainable. On Wednesday, figures from the German Federal Statistics Office showed that German PPI measured month-on-month fell 0.1%, after staying flat in June, while on a yearly basis prices for industrial products jumped 0.5%, following a 0.6% gain a month earlier. Analysts, however, predicted a stronger reading both annually and monthly, saying PPI should increase 0.7% and 0.2%, respectively. Muted growth of producer prices means weak growth of consumer prices, as manufacturers usually pass higher costs on to the consumers.
Earlier this month data showed consumer goods prices advanced 2.9% year-on-year last month, while increasing 0.3% on a monthly basis. In addition to that, German GDP increased 0.7% in the second quarter, pulling the whole Eurozone out of its longest-ever recession. The European Commission now expected German real economic output to expand 0.4% this year and 1.8% in 2014. Nonetheless, Europe's southern countries are still struggling to grow, weighing on the pace of German recovery.
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