Month-on-month, producer prices fell by 0.5%, contrasting with a 0.2% increase in August 2024.
The sharper fall in producer prices suggested waning demand as producers reduce prices in a weakening demand environment. Significantly, economists consider producer prices a leading economic indicator for inflation. Downward trends in producer prices may pass cost savings onto consumers, dampening inflationary pressures.
Furthermore, waning demand for German goods could intensify concerns about Germany's economic outlook.
The continued fall in producer prices may raise investor expectations of a December ECB rate cut. Last week, the ECB cut interest rates by 25 basis points while maintaining a data-dependent approach for the December interest rate decision.
Weakening demand and the gloomy economic outlook may pressure the ECB to cut interest rates further. However, to cement expectations for a December ECB rate cut, CPI reports from the Eurozone must show signs of weakening demand.