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Author: Frank Knopers
Inflation in Italy does not seem to be too bad at only 2.9% year-on-year, but if we dive deeper into the figures, we see a worrying development there too. For example, producer prices in that country have skyrocketed in recent months. In October, they were even 20% higher than a year earlier. Companies are spending a lot more money on energy, but semi-finished products and raw materials have also risen sharply in price.
The graph below shows the developments of producer prices (year-on-year) over the past thirty years. During this period, companies' purchasing costs have never risen as fast as they do now. The reason for this is the corona crisis, because it has seriously disrupted logistics chains worldwide. The consumption pattern of households changed (more goods, fewer services), resulting in a shortage of production and transport capacity. The prices of container transport have therefore exploded since the corona crisis Increased. 
Producer prices in Italy skyrocket (Source: Trading Economics)
Also in Germany producer prices have risen sharply in recent months. The delivery time of goods and raw materials is increasing, which means that companies want to build up even more stocks. This causes even more stress and problems in the production chains. Due to shortages of certain parts, complex production processes are delayed, resulting in fewer end products coming to market. This also drives up prices in the stores.
With new fiscal stimulus measures and rising energy prices on the horizon, inflation does not look like it will return to below 2% levels anytime soon. Nevertheless, the ECB is sticking to this point of view, so as not to have to adjust monetary policy. So the Italians are still in for a treat, because these price increases for producers will end up with the consumer one way or the other. We will continue to monitor this development closely.
Energy prices in particular have risen sharply this year
This article was previously published on Geotrendlines
