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Last Updated: Wednesday, 19 April 2006, 09:14 GMT 10:14 UK
German inflation fears increase
Steelworker at plant of German firm ThyssenKrupp
The German economy is showing signs of recovery
German producer prices continue to rise at their fastest pace in two decades, fuelling concerns about inflationary pressures in Europe's largest economy.

Factory gate prices - what German firms pay for industrial products - rose 5.9% in March compared to a year earlier, driven by rising energy costs.

This matched the 5.9% annual rise seen in February although, on a monthly basis, prices rose a further 0.5%.

Energy prices rose 22%, as world oil prices hovered near record levels.

Energy trend

Producer prices are regarded as a key gauge of future inflationary trends, providing evidence of price movements at an early stage of the economic cycle.

The German economy has been showing signs of a slow upturn, with exports improving and domestic demand gradually picking up.

At 2.1%, German consumer price inflation is above the 2% limit recommended by the European Central Bank but has remained broadly unchanged in recent months.

However, producer prices are now rising at their fastest annual rate since 1982, as firms face rising energy costs.

The cost of electricity was 24% higher than in the same month last year while natural gas prices rose 29%.

"The trend of rising energy prices continued in March," the Federal Statistics Office noted in its monthly report.

Excluding energy costs, however, producer prices rose a modest 1.2% year-on-year.

German inflation is of growing concern to the European Central Bank, which sets interest rates across the 12-nation eurozone. The ECB has raised interest rates twice since December 2005, from 2% to 2.5%, and many analysts expect another rise in May.


SEE ALSO:
Euro interest rate stays at 2.5%
06 Apr 06 |  Business
German trade balance gets boost
07 Apr 06 |  Business
Energy costs spur German prices
20 Mar 06 |  Business
German inflation still above 2%
10 Mar 06 |  Business
German jobless point to recovery
28 Feb 06 |  Business
German economic confidence rises
23 Feb 06 |  Business


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