Risk of deflation? Import prices fall from +1.4% to -0.2%

Is there a danger of deflation? What’s going on? Well, honestly. Until consumer prices slide from currently +1.6% into the negative, a lot still has to happen. But: The current data should be more than worrying. German import prices are one of three early indicators of final consumer prices. After all, these prices are ultimately passed on by producers and wholesalers to supermarkets and thus to consumers.

The Federal Statistical Office has recently announced that import prices in the month of May have fallen by 0.2% compared to May 2018! This is a dramatic fall, as the year-on-year comparison was still +1.4% in April. In the months before that, there were always clear plus values! We can therefore assume that imported goods will be passed on to the end consumer in the following months with significantly less price pressure. The reason for the price decline is given by the statisticians as follows:

The decline in import prices compared with May 2018 was mainly influenced by the development of import prices for energy. On average they were 4.1 % lower than in the same month of the previous year (+0.1 % compared with the previous month). Natural gas had the greatest impact on the rate of change for energy with a minus of 16.4 %. Hard coal (-10.3%) was also cheaper in May 2019 than in May 2018. By contrast crude oil was 2.7% more expensive than a year ago.

Here further details in the wording:

Prices for imported semi-finished goods were on average 0.3% lower than in May 2018 (-0.4% compared with the previous month). Electronic components (-7.8 %), pig iron, steel and ferroalloys (-3.9 %), among other things, fell in price compared with the same month of the previous year. By contrast, prices for iron ore (+28.1%) and precious metals and their semi-finished products (+9.6%) were higher than in May 2018.

Imported agricultural goods were on average 1.8% more expensive than in the previous year (+0.2% compared with the previous month). While live pigs (+31.7%) and potatoes (+27.9%) were significantly more expensive than in May 2018, apples (-17.2%) and green coffee (-6.9%) were imported at lower prices.

Prices for imported investment goods in May 2019 were 0.3 % higher than in May 2018. They did not change compared with the previous month. While machines (+1.5%) and cars and their parts (+0.6%) were more expensive year-on-year, smartphones (-9.6%) and tablets (-7.5%) were imported at lower prices than in May 2018.

Import prices for consumer goods (consumer durables and non-durables) rose by 1.1 % in May 2019 compared with the same month of the previous year (+0.1 % compared with the previous month). Consumer goods were 1.3 % more expensive than in the previous year. Import prices for consumer durable goods rose by 0.7 % on average.

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