Conflict inc8k8 com login phreases strain on Germany's economy

Germany's economy has felt the pinch from the Russia-Ukraine conflict for the first time, after monthly figures from the Federal Statistics Office revealed the full extent of the latest sharp rise in producer prices.

After a 25.9 percent annual price rise in February, a poll of experts conducted by the Reuters news agency showed an expected figure of 28.2 percent for March, but the actual figure turned out to be 30.9 percent, the highest figure on record, with continued high energy prices being the main driver.

"These results should already contain first implications deriving from Russia's attack on Ukraine," said the office, as it commented on the sixth consecutive month of sharp rises.

Factory gate costs are often regarded as an indicator of what will happen to consumer prices, and with the March rise being the biggest since records began in 1949, it is an ominous warning for the wider economy.

Once again, steep increases in energy costs were mainly to blame, with prices up 83.8 percent on those from a year ago, and the main reason being a 144.8 percent rise in the costs of natural gas over the course of 12 months.

Germany's reliance on Russia for so much of its energy supplies - around 46 percent of its natural gas, according to figures from the International Energy Agency - means that it cannot cut ties as quickly as it might like to, because of the impact it would have on the already strained economy.

The latest figures back up warnings from the end of February about the pressure Europe's most important economy has been under for some time now, with Ralph Solveen, an economist at Commerzbank, warning that "the pressure in the inflation pipeline remains high", adding "we expect the (consumer) inflation rate in Germany to hover around 5 percent into the autumn", which would be one percentage point higher than the annual forecast of the authoritative Ifo economic institute.

Consumers could soon feel the pain in their pockets, too, with LBBW analyst Jens-Oliver Niklasch telling the Euronews website that "it's likely that retailers will pass at least some of this (pressure) on to end consumers".

The memory of hyper-inflation and the role it played in Germany's economic collapse of the 1930s, contributing toward the rise of Nazism, means that economic stability is highly prized in the country, with inflation still regarded with widespread fear, but the country's economy minister, Robert Habeck, has already warned citizens to brace themselves for feeling the economic impact of the Ukraine conflict.

"It is not possible that this ends without costs for German society, it is unthinkable," he said last month.