German Producer Prices Fell by 0.3% Versus a Forecasted 0.4% Fall

Highlights

• It was a relatively busy start to the day on the European economic calendar.
• German producer price index numbers for June drew interest this morning.
• In June, the Producer Price Index fell by 0.3% versus a 1.4% slide in May.

It was a relatively busy start to the day on the European economic calendar. Producer price index numbers from Germany drew interest early in the European session.

Investor sensitivity to the producer price index has intensified because of the weak demand environment, with China and Germany registering sharp falls in producer prices.

The German producer price index fell by 0.3% in June, following a 1.4% slide in May. Economists forecast a 0.4% decline.

According to Destatis,

• Year-over-year, producer prices increased by 0.1%.
• Marked declines in the prices of intermediate goods and energy offset marked increases in the prices of durable and non-durable consumer goods.
• Compared with June 2022, non-durable consumer goods were up 9.4% (May: +0.1%), with durable consumer goods rising by 6.7% (May: +0.1%).
• Prices for capital goods rose by 6.3% (May: +0.2%), while intermediate goods prices declined by 2.7% (May: -0.9%).
• Energy prices fell by 5.0% (May: -0.2%).

With inflation numbers from Wednesday supporting the more hawkish ECB policy bets, today’s numbers, albeit better than forecasted, coupled with a hawkish ECB, could signal more doom and gloom for the German economy.

EUR/USD Reaction to German Producer Price Index Numbers

Before the German producer price index numbers, the EUR/USD fell to an early low of $1.11979 before rising to a pre-stat high of $1.12292.

However, in response to the German producer price index numbers, the EUR/USD rose to a post-stat high of $1.12184 before falling to a low of $1.12090.

This morning, the EUR/USD was up 0.06% to $1.12092.

Up Next

After the hotter-than-expected Eurozone core inflation numbers and the German PPIs, investors should track ECB chatter, with investors looking for post-summer policy intentions. No ECB members are on the calendar to speak today, leaving commentary with the media to move the dial.

The US Session

US jobless claims and the Philly Fed Manufacturing Index will move the dial. However, with the US manufacturing sector contracting for the eighth consecutive month in June, according to the ISM survey, the jobless claims will likely have more impact.

Upbeat numbers would support the theory of a soft landing. However, tighter labor market conditions would also pressure wage growth. Increasing demand for goods and services would push the prices for goods and services higher.