The Wholesale Price Index (WPI) is an index that shows the change in prices of goods sold by German wholesalers. It is one of the leading indicators of consumer price inflation. A reading that is stronger than expected is generally supportive (bullish) for the Euro, while a reading that is weaker than expected is generally negative (bearish) for the Euro. Selling price indices in wholesale trade are used to deflate monthly wholesale sales volume and calculate wholesale performance at constant prices as part of national accounting. The Wholesale Price Index can also be considered a leading indicator because it indicates the price trend in previous branches which will only later have an impact on buyers’ selling prices for wholesale goods.
The selling price index in wholesale trade is calculated by the Laspers formula, which is generally applied in German price statistics. What distinguishes this type of indicator is the fact that it records the development of prices over time, excluding quantity changes. This is done by specifying a weighting pattern derived from the sales shares of the economic branches of wholesale trade in the base year. The weights referring to the current base year will remain unchanged until the index is recalculated to a new base year (approximately every 5 years). In terms of the main steps of the calculation, the index can be described as the weighted average of the price change figures for a representative set of goods for resale, represented by base year = 100.
The purpose of the Wholesale Trade Selling Price Index is to measure pure price changes, which applies to all other price indices of official statistics. This is achieved by keeping all factors relevant to the price level constant (among others, the unit quantity of products, their overall quality
The impact of the German wholesale price index on the euro and financial markets
The release of the German Wholesale Price Index (WPI) is an important economic event that receives wide attention from investors and traders in the financial markets. This indicator can significantly affect the value of the Euro, stock and commodity markets. When the German wholesale price index is released higher than expected, it reflects the accumulation of inflationary pressures in the German economy. Since Germany is the largest economy in the Eurozone, these pressures could lead to expectations of higher inflation in the Eurozone overall.
The impact of this index on the euro depends on several factors, including the size of the surprise in issuing the index, the current economic situation, and the monetary policy stance of the European Central Bank. An unexpected rise in the wholesale price index usually leads to speculation that the European Central Bank may need to tighten monetary policy faster than expected to curb inflation, causing the value of the euro to rise. On the other hand, if the data indicates that the ECB will not react aggressively to inflationary pressures, or if other factors such as geopolitical tensions or global economic concerns are present, the impact on the euro could be limited or negative.
The impact of data on monetary policy and the market: These data are considered an important indicator for the European Central Bank to make monetary policy decisions. A significant decline in some wholesale prices may indicate lower inflationary pressures, which could delay any decisions to tighten monetary policy. However, increases in some food product and tobacco prices may indicate persistent inflationary pressures in specific sectors, warranting close monitoring by monetary authorities. Therefore, the impact on the market depends largely on the overall interpretation of the data and overall inflation trends in the euro area.
Analysis of the German wholesale price index in April 2024
The German Wholesale Price Index rose by 0.4% m/m in April 2024 compared to March 2024, indicating a slight increase after a series of volatile changes in the previous months. For example, March 2024 saw a 0.2% increase month over month compared to February, which saw a 0.1% decrease. These changes in wholesale prices are an important indicator because they reflect inflation trends and pricing power within the wholesale sector, which affects general economic conditions and monetary policy decisions.
In April 2024, wholesale prices decreased by 1.8% compared to the same period in 2023, representing the opening monthly update after wholesale prices were recalibrated to the new base year 2021. March 2024 saw a year-on-year change of -2.6% using 2021 as the base year, while February recorded a change of -2.7%. This change comes as a result of amendments to the weighting system and commodity basket within the new methodology.
The significant decline in wholesale prices, especially in chemical products (-17.9%), resulted in an overall decline in wholesale prices in April 2024 of 1.5% compared to March 2024. Wholesale prices also saw other significant declines in grains, unprocessed tobacco, seeds, and feed. Livestock (-12.2%), minerals and mineral ores (-7.2%), waste and scrap (-6.8%), milk and dairy products, eggs, fats, and edible oils (-6.3%). In contrast, wholesale prices for coffee, tea, cocoa and spices increased by 9.3% compared to April 2023.
Wholesale prices for April 2024
-1.8% and for the same month of the previous year
+0.4% from the previous month In April 2024, wholesale prices fell by 1.8% compared to April 2023. This is the first updated monthly result after wholesale prices were reset to the new base year 2021 (in German only).
German wholesale price index in March 2024
In March 2024, the year-on-year change rate was -2.6% using 2021 as the base year (base year 2015: -3.0%), and in February it was -2.7% (base year 2015: -3.0%). The difference between the new rates of change and those based on the base year of 2015 is due to the adjusted weights applied in the new weighting system and the revised basket of goods. The Federal Statistical Office (Destatis) also reported that wholesale prices in April 2024 rose by 0.4% from March 2024.
