The prices that German manufacturers charge for their goods plunged 14.7 percent in this year’s first nine months, the steepest nine-month plunge since records began being kept in 1949, the government reported.

Lower producer prices usually precede lower consumer prices, indicating a slowing pace of inflation.

Helped by lower producer prices, Germany’s consumer inflation will shed a full percent point this month, dropping to 3.3 percent after notching 4.3 percent in September, UBS economist Anna Titareva predicted in a note.

That would be Germany’s slowest rate of consumer price increases since August 2021, she said.

The drop in factory prices was enabled by falling energy prices, the Financial Times reported.

Ignoring energy costs, producer prices actually rose 0.8 percent for the period, the FT said.

During the same nine months, Germany’s exports beyond the Eurozone fell by 8.7 percent, compared to the same period in 2022. Shipments to China and the U.S., Germany’s two main trading partners, were each off by double digits, according to the FT.

The decline in exports is “another reason to expect a fairly hefty quarterly drop in German gross domestic product in the third quarter,” economist Oliver Rakau at Oxford Economics told the FT.

“The disinflationary process could still gain momentum in the coming months,” Carsten Brzeski, an economist at UBS bank, told the FT, “ but looks to be short-lived” as the Mideast war threatens to send energy prices higher. 

If that happens, “headline inflation would rebound in the first half of 2024,” he added.

Germany will be this year’s worst-performing major economy, the International Monetary Fund has predicted, shrinking by 0.5 percent and scratching out a 0.9-percent expansion in 2024.

TRENDPOST: As Germany’s economy goes, so goes Europe’s.

Revenue in southern Europe’s tourist meccas will not offset Germany’s weak manufacturing sector. With Germany, the EU’s largest economy and the fourth largest in the world contracting this year and barely growing through 2024, it will be even harder for the Eurozone to avoid a recession, beginning in this quarter or early next year. And, with the Israel and Ukraine Wars raging, the trend line for higher energy prices keeps expanding which means Dragflation: Declining economic growth and rising inflation.