German import prices jump at fastest annual pace since November 2022 as energy costs surge

• German import prices climbed 2.1% in September from the prior month, against a 1.8% forecast.
• The previous month recorded a 1.0% increase.
• On an annual basis, import prices rose 10.4% in September, topping the 10.3% expectation.
• The prior year's comparable figure was an 8.3% rise.

As if Germany did not have enough economic challenges, it now faces a renewed inflation threat stemming from rising import costs.

September import prices posted their largest annual gain since November 2022, while the month-on-month rise also surpassed forecasts. Energy costs were again the primary driver.

Energy import costs jumped 61.8% from a year earlier, and electricity prices nearly doubled at a 96.2% increase. The US-Iran conflict is weighing on Germany's import expenses, and companies are finding little relief from cost pressures elsewhere.

Intermediate goods prices were up 11.1% annually, with copper rising 37.9% and aluminium climbing 23.4%. Excluding energy, import prices still rose 5.5% year-on-year in September.

What do these numbers mean?

The breakdown shows that Germany's imported inflation goes beyond oil and gas. Input cost increases are extending through industrial supply chains, potentially compressing manufacturer margins when the economy can least handle a further hit.

The data also poses a challenge for the European Central Bank. While import prices are not the same as consumer prices, persistent rises in energy and production costs could eventually reach households, depending on how much firms can pass on.

Overall, the import price figures support expectations of another ECB rate increase in December, especially given market pricing of around 61% probability for such a move.