Energy Pushes Germany's PPI Lower

Producer prices in Germany continued their decline at the end of 2025, reinforcing the disinflationary pattern that characterized much of the year.

December's Producer Price Index (PPI) fell 2.5% year on year, down from -2.3% in November and slightly weaker than the -2.4% market forecast. This marked the tenth consecutive annual decline and the sharpest contraction since April 2024, underlining persistent pricing pressure at the production level.

Energy: The Heavyweight Driver

Energy continued to dominate the headline move, exerting strong downward pressure on producer prices. Costs in the energy segment declined 9.7% yearly, with broad-based weakness across key components:

• Natural gas: -14.6%
• Electricity: -11.1%
• Mineral oil products: -6.6%
• District heating: -0.2%

These declines confirm that energy remains the most powerful deflationary force within Germany's production chain and a central anchor for easing price pressure.

Beyond Energy, Prices Still Climb

Excluding energy, producer prices told a different story. Core PPI rose 0.9% year on year, up from 0.8% in November, driven by firmer trends across several categories:

• Non-durable consumer goods: +0.6%
• Durable consumer goods: +1.8%
• Capital goods: +2.0%
• Intermediate goods: +0.3%, supported by higher metal prices

The data suggests that while headline pressures remain subdued, certain segments continue to experience cost firmness rather than broad cooling.

Monthly Dip Signals Renewed Softness

PPI declined 0.2% monthly in December, matching forecasts and reversing November's flat reading. This marked the first monthly decline in three months, pointing to renewed softness in near-term producer pricing. Producer price deflation averaged 1.2% throughout 2025, confirming that Germany spent most of the year under sustained pricing pressure at the producer level. For markets, the takeaway remains nuanced: energy-driven weakness keeps inflation contained, while resilience in core categories shows that price dynamics across the economy are uneven rather than fully subdued.