German Producer Prices Mark Record Fall

Earlier this month consumer prices fell for the first time in 22 years.

The cost of goods at the factory gate in Germany, registered their steepest drop in July since records began in 1949, official figures showed on August 19.

Prices were 6.6% lower than at the same time last year, mainly because oil prices now are so much lower than at the corresponding time in 2008.

"More than two thirds of the change in the whole index compared to July 2008 is down to price developments in energy," the statistics office said.

However, analysts said that the drop in producer prices -- often a good indicator for how inflation will develop -- does not necessarily presage a prolonged period of deflation for Europe's largest economy.

"We do not think that this is the start of a deflationary spiral," said Andreas Rees, an economist at Italian banking giant UniCredit. "In coming months, it is very likely that inflation will start shrinking less markedly. From autumn 2009 onwards, yearly inflation rates should leave negative territory," he added.

Earlier this month, data showed consumer prices fell for the first time in 22 years in July.

Copyright Agence France-Presse, 2009

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