Producer prices: Germany is at risk of de-industrialization

The Federal Statistical Office announced that producer prices for commercial products in Germany rose by 45.8 percent in August compared to the previous year. Experts had previously expected a smaller increase. The main price drivers were energy costs, which more than doubled over the year.

This does not bode well for the inflation outlook. Producer prices anticipate the development of inflation. The price increases in production are passed on to consumers. The export-oriented German industry is losing international competitiveness due to the high energy prices in Germany.

The price development is an alarm signal for German industry. As numerous media reports unanimously, numerous companies are already reacting with production cuts.

The fertilizer industry has reduced or shut down 70 percent of its German production, it was reported Handelsblatt. However, the industry is not alone in this. Energy-intensive companies face the choice of either closing or moving abroad where energy prices are lower. The Handelsblatt quoted a management consultant as a source who wished to remain anonymous. For weeks he has been commissioned almost exclusively with plant closures.

Because of the rising energy prices caused by western sanctions, Germany is actually threatened with de-industrialization. In the case of plant closures and emigration, the development cannot be easily reversed. Despite actual losses, many companies are still maintaining production in the hope of a trend reversal. However, this is only possible for a limited time. Experts agree that if there is no trend reversal or government support to the necessary extent, there will be a wave of bankruptcies on an enormous scale, which will have serious consequences for Germany as a business location. In particular, medium-sized companies are affected, which do not have the option of simply relocating production to existing locations abroad.

If German politicians do not change their energy policy, energy-intensive key industries such as the aluminum industry will disappear from Germany, warned the President of the Association of the Aluminum Industry, Hinrich Mählmann.

The Swabian Chamber of Industry and Commerce addressed the public with a press release. In a survey among its members, the Chamber of Industry and Commerce found that every third company in industry and construction is affected by production downtime and restrictions. Every fourth company sees its own business model in danger. In addition to the high energy costs, interrupted supply chains continue to be a problem for German producers. It seems like the perfect storm is brewing.

If numerous locations are closed, there is a risk of cascading effects that will affect entire regions. Germany as an industrial location is in danger.

The concerns of German industry could easily be taken into account by relaxing or lifting the sanctions. But German politicians are not prepared to take such a step.

more on the subject – High energy costs: Every second German trading company fears for its existence

Source: RT

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J. A. Allen

Author, blogger, freelance writer. Hater of spiders. Drinker of wine. Mother of hellions.

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