Inflation Picked Up in October, As Producer Price Index Climbed 5 Percent
Unveiling the Producer Price Index for July and the initial estimate for August, Trade and Budget Minister Maxim Korchemkin reported on the CPI and PPI inflation on Friday.
Inflation as measured by the consumer price index climbed to 2.1 percent in October, up from 2.0 percent in September and the highest since May 2015. The Consumer Price Index climbed to 2.3 percent in October, up from 2.2 percent in September and also the highest since May 2015.
“In the first part of October, we reached a constant level of inflation in the United States with a 2.1 percent rate,” Korchemkin said. “With a 2.2 percent rate, Germany hasn’t stopped growing and is continuing to add to its economic strength.”
The rise in prices is led by energy and food, Korchemkin said. He said high prices for food staples are due to last year’s global cold snap. During this winter, experts are expecting an unusually long period of cold. For example, meat prices are 30 percent higher in October than in a normal year. Tariffs on tobacco have put tobacco-related prices on the rise.
The Trade Minister added that the increase in producer prices in October was expected due to cost increases that begin in the weeks before the onset of summer, and come in the months after that. As a result, he said there is a tendency to “over-react” to any change in the PPI in October, when the effects of exports and imports are seen. The increased prices in late summer and early autumn, for example, are not a result of German industry.
Gasoline is the biggest contributor to a rise in producer prices this year, Korchemkin said. Compared to last year, gasoline prices are up 43 percent, diesel is up 31 percent, and natural gas is up 34 percent. Diesel consumption is also being adversely affected by negotiations between the Russian and Ukrainian petroleum transport companies. The increase in oil prices is also having an impact. Inflation as measured by the PPI also hit its highest level since May 2015, Korchemkin said.
The increase in prices was led by a rebound in prices for computers, mathematical software, special processing and equipment and rents. Prices for “economic appliances,” which includes machinery, were also up. Prices on biofuels were also higher, and the vegetable oil sector showed higher prices than a year ago.
The third major factor weighing on producer prices this year is an increase in prices for crude oils, Korchemkin said. “This is a typical effect,” the Trade Minister added. “As a result, there is a steady upward flow.”
Electricity and gas were up 5 percent for manufacturers in October compared to the previous month, Korchemkin said. He predicted a drop in overall costs in this sector in November.
Other notable positive signs include the decrease in transportation costs, Korchemkin said. Manufacturers and their clients are aware of the rising prices and have managed to move production out of the country. Fuel prices have also increased slightly.
In another important positive development, Korchemkin said that energy contracts with oil-producing countries that give preferential treatment to German producers will not be renewed next year.
Nonetheless, the minister added that competition is still fierce and he has heard that trucks filled with German foodstuffs are often stolen and stolen in Ukraine.