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Saturday, July 19, 2008

German Producer Prices Accelerate Again In June

German producer prices rose at their fastest pace in 26 years in June, adding to pressure on the European Central Bank to keep interest rates high even as economic growth slows. Producer prices increased by 6.7 percent from a year earlier, the most since March 1982, after rising an annual 6 percent in May, according to data on Friday from the Federal Statistics Office in Wiesbaden said today.

German energy prices rose 17.9 percent from a year earlier and prices for mineral oil products were 28 percent higher, the statistics office said. Excluding energy, producer prices rose 3 percent. From May, including energy, prices rose 0.9 percent.

Oil has risen more than 70 percent over the past year and reached a record of $147.27 a barrel on July 11. Inflation in Germany accelerated to 3.4 percent in June, the fastest pace in 12 years, and consumer prices in Europe gained an annual 4 percent, the most since 1992.

Higher prices are eroding purchasing power in Germany and curbing growth in an economy already burdened by a stronger euro and the slowdown in Italy and Spain. German investor confidence plunged to a record low this month according to the ZEW Center for European Economic Research.

Germany's Finance Ministry predicts economic growth will slow to 1.7 percent this year and 1.2 percent next, but there are now tremdous downside risks attached to this assessment, and there must be a 50% possibility that Germany will enter a recession sometime this year.

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