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German Producer Prices Surge 6 Percent In May

Producer prices for industrial products rose at their fastest annual pace in nearly two years, propelled by soaring energy costs, government data showed.

BERLIN (AP) -- German producer prices rose at their fastest annual pace in nearly two years in May, propelled by soaring energy costs, according to government data released Friday.

Producer prices for industrial products, a measure of price pressures at the factory gate seen as an important gauge of inflation before it reaches consumers, were up 6 percent from May 2007.

That compared with an annual rate of 5.2 percent in April. The Federal Statistical Office said the rate last reached 6 percent in July 2006.

The office said increasing energy costs were the main factor driving prices upward.

They were up 15 percent on the year in May, accelerating from 12.6 percent in April. With energy stripped out, the statistics office said that producer prices would have risen by only 2.9 percent.

Andreas Rees, an economist at UniCredit in Munich, said the reading ''indicates once again that there is enormous pressure in the inflation pipeline'' and forecast that producer price inflation might jump to nearly 7 percent in June.

However, he noted that ''what really matters for monetary policy is whether companies are able to pass on higher input costs to consumers.''

With consumers already lacking purchasing power, ''if companies try to raise their prices on a broad scale, Mr. Average Citizen will spend even less on durables,'' he said in a research note. ''In terms of company profits nothing would be gained.''

Producer prices were up 1 percent on the month in May.

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