Germany’s producer prices fell for the 16th straight month in October, marking a 1.1% decline compared to the same month last year, according to the Federal Statistical Office. The drop, in line with analysts’ expectations, was slightly smaller than the 1.4% decrease recorded in September.

The Producer Price Index (PPI), which measures the average change in selling prices received by domestic producers for goods and services, was primarily affected by a sharp drop in energy prices. Energy costs fell by 5.6% in October from the previous month.

Light heating oil prices saw the steepest decline, plummeting 22.7%, while prices for mineral oil products and natural gas decreased by 12.9% and 10.1%, respectively. Fuel prices dropped 12.1%, and electricity prices were down by 7.3%.

Excluding energy, producer prices rose by 1.3% in October. Prices for capital goods increased by 2%, driven by a 1.4% rise in motor vehicles and parts, and a 2% increase in machinery costs. Durable goods prices edged up 0.9%, while consumer goods prices rose by 1.9%. Intermediate goods prices also saw a slight rise of 0.4%.

On a month-on-month basis, the PPI grew by 0.2% in October, rebounding from a 0.5% decline in September and meeting market forecasts.

Economic Recovery Hopes Amidst Slowing Activity

Despite the drop in producer prices, Germany’s economy remains under pressure due to weakened industrial output and reduced consumer spending, driven by high interest rates and rising living costs.

In its latest forecast, the European Commission projected a 0.1% contraction in Germany’s economy for 2024. “High uncertainty has been weighing on consumption and investment, while the trade outlook has worsened as global demand for industrial goods declined,” the Commission noted.

However, the report highlighted expectations for an economic recovery starting in 2025, with GDP growth projected to rise to 0.7% that year and 1.3% in 2026. The recovery is anticipated to be supported by increases in real wages, bolstering domestic demand.

Inflation in Germany is expected to moderate, averaging 2.4% in 2024 before easing to 2.1% in 2025 and further declining to 1.9% in 2026. Meanwhile, the government deficit is forecast to decrease, and the national debt ratio is expected to stabilize at around 63% of GDP.

The ongoing decline in producer prices offers some relief to businesses, but it underscores the broader challenges facing Germany’s economy as it seeks to rebound from prolonged industrial slowdowns and global trade uncertainties.

Thyssenkrupp has announced a further €1 billion write-down of its steel business, citing weak earnings projections and the costly demands of transitioning to greener operations. The German industrial conglomerate reported a net loss of €1.4 billion for the fiscal year, primarily driven by the asset impairment. This loss is an improvement over the €2 billion deficit reported last year.

The latest devaluation marks the second major impairment for Thyssenkrupp’s steel division in two years, following a €2.1 billion write-down in November 2023.

Strategic Decisions Ahead for Steel and Naval Units

“In respect of our main strategic issues, the current fiscal year will be a year of decisions — especially for Steel Europe and Marine Systems,” CEO Miguel Lopez stated on Tuesday.

Thyssenkrupp’s steel unit, Germany’s largest, has faced sustained challenges, including higher energy costs, competition from cheaper Asian producers, and the financial burden of decarbonization. The transition to green operations has triggered internal disputes, contributing to leadership turnover and uncertainty about the unit’s future.

The company is in discussions with Czech billionaire Daniel Křetínský, who currently owns 20% of Thyssenkrupp’s steel business. There is speculation that his stake could increase to 30%, but no confirmation has been made.

Leadership Shake-Up and Restructuring Concerns

The decarbonization effort and restructuring plans have led to significant departures. Bernhard Osburg, CEO of Thyssenkrupp’s steel unit, and Sigmar Gabriel, head of the supervisory board, resigned earlier this year, alongside other executives and board members.

Concerns about the steel unit’s potential spinoff with inadequate financial backing have also been raised. “The fear is that we will be given as little dowry as possible, so that at the end of the day the insolvency administrator will be at our door,” warned Ali Güzel, chairman of the Works Council at the Duisburg/Beeckerwerth site, in August.

Marine Systems IPO in the Pipeline

Thyssenkrupp is also seeking to offload its naval shipbuilding subsidiary, Thyssenkrupp Marine Systems. After US private equity firm Carlyle withdrew its bid last month, the company is now planning an initial public offering (IPO) for the unit.

Financial Outlook and Market Response

Despite the setbacks, the company offered some optimism in its earnings forecast. Adjusted earnings before interest and taxes (EBIT) for the current fiscal year are projected to rise to between €600 million and €1 billion, up from €567 million in the previous year.

Thyssenkrupp shares saw a 6% increase in daily trading on Tuesday, signaling cautious optimism from investors amid ongoing challenges.