Decrease of 0.6% in German Wholesale Prices for December

Highlights

• German wholesale prices decreased by 0.6% in December following a 0.2% drop in November.
• Wholesale price patterns were influenced by a subdued demand environment.
• Coming up, there are upcoming releases of German GDP data for Q4, Eurozone industrial production numbers, and trade data.

During the early part of the European session on Monday, attention was on the German economy.  

German Wholesale Prices Show Varied Trends in December

Wholesale prices in Germany declined by 2.6% year-over-year in December, a decrease from the 3.6% drop in November and below economists' forecast of a 2.3% decline. On a month-to-month basis, wholesale prices fell by 0.6% in December compared to a 0.2% decrease in November, diverging from economists' expected 0.3% decline.

According to Destatis, the decline in year-on-year wholesale prices was mainly driven by a 9.8% decrease in mineral oil products. Furthermore, there were notable declines in prices for grain, unmanufactured tobacco, seeds, animal feeds (-19.7%); chemical products (-19.0%); metals and metal ores (-12.7%); and waste and scrap (-7.6%). Contrarily, there were year-on-year price increases for fruit, vegetables, potatoes (+13.9%); sugar, confectionary, bakery products (+8.9%); beverages (+7.1%); and tobacco (+5.8%). The average wholesale prices experienced a 0.5% annual decrease in 2023.  

EUR/USD Response to German Wholesale Prices

Pre-GDP Reaction: Prior to the release of German industrial production figures, the EUR/USD initially dipped to $1.09407 before climbing to $1.09674. However, following the wholesale price report, the currency pair surged to $1.09653 before declining to $1.09609. By Monday, the EUR/USD had increased by 0.15% to $1.09649.

Potential Impact of German GDP Figures on Recession

Anticipated German GDP Results: German GDP numbers for Q4 2023 are set to confirm the economy's recessionary state. Recent economic indicators have raised concerns, with retail sales and industrial production figures reflecting a challenging economic landscape. A steeper-than-expected economic downturn may signify an extended recession, potentially heightening fears of a Eurozone-wide economic slowdown. Worsening macroeconomic conditions could amplify speculation regarding an ECB interest rate cut in the first half of 2024.

Eurozone Industrial Production and Trade Data Analysis

Upcoming Eurozone Economic Indicators: Later in the session, investors will need to assess Eurozone industrial production and trade data. Forecasts indicate an anticipated 0.3% decline in industrial production, while experts predict the trade surplus to expand from €11.1 billion to €12.5 billion in November. Improved trade terms coupled with a decrease in industrial production would align with previous November statistics from Germany.