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Refinery in Karlsruhe: Petroleum products significantly cheaper than a year ago

Photo: Christoph Schmidt / dpa

German wholesale prices fell for the second time in a row in May due to cheaper energy. They fell by 2.6 percent compared to the same month last year, the Federal Statistical Office announced. This is the sharpest decline since July 2020, when the outbreak of the corona pandemic also caused economic upheaval. In April, there had already been a minus of 0.5 percent – the first year-on-year price decline since December 2020. From April to May, wholesale prices also fell, by 1.1 percent.

With the decreasing price pressure in the wholesale sector, inflation in Germany could also ease further. This is because wholesalers are seen as a hinge between manufacturers and end customers, and price changes usually reach consumers with a delay. The inflation rate of 6.1 percent in May was at its lowest level in more than a year.

Petroleum products such as gasoline, which rose particularly sharply a year ago after Russia's invasion of Ukraine, had the greatest impact on the development of wholesale prices last month. This time, they were 22.7 percent cheaper than a year earlier. Prices were also lower for scrap material and residues (-31.3 per cent), cereals, raw tobacco, seeds and animal feed (-27.9 per cent), ores, metals and semi-finished metal products (-22.1 per cent) and chemical products (-9.4 per cent). On the other hand, prices rose for fruit, vegetables and potatoes (+22.5 per cent), building materials and building elements made of mineral substances (+11.6 per cent) and for live animals (+16.9 per cent).

Many economists now believe that the peak in inflation has passed. "However, inflation is still likely to be more than five percent in 2023 as a whole, especially due to high inflation at the beginning of the year," said Sebastian Dullien, scientific director of the Institute for Macroeconomics and Business Cycle Research (IMK). For 2024, an inflation rate of less than 2.5 percent is expected.