Germany's August import prices beat expectations

• Import prices in Germany climbed 1.0% month-on-month in August, topping the 0.7% gain that had been forecast.
• The prior month's reading had been a 0.2% increase.
• On a year-on-year basis, import prices advanced 8.3%, also beating the 8.0% projection.
• The annual rate had been 6.8% in July.

Further details are still to come.

The import price index is a measure of how prices for goods brought in from abroad have changed for German purchasers. It acts as an early signal of cost pressures that have not yet passed through to producers and consumers.

Import prices provide hints about where inflation is headed, which is especially relevant for Germany because of its large reliance on foreign energy and raw materials. Sustained rises can reinforce worries that these higher input expenses will ultimately show up in consumer prices.

In July, import inflation had quickened to 6.8% year-on-year. Energy prices surged 26.4%, and imported intermediate goods rose 10.2%, mostly owing to the ongoing impact of the Iran situation and increased commodity prices.

A result that comes in above forecasts tends to be supportive for the euro and negative for German bonds (positive for yields) because it adds to inflation concerns and might encourage a more hawkish stance from the European Central Bank. A weaker number would alleviate those worries somewhat, but market moves are generally constrained unless the deviation is large.

Relevance at present is moderate. Import prices are gaining importance as the energy shock filters into Europe's inflation figures, but the German September consumer-price index release scheduled later today will have a far bigger influence on ECB expectations and the euro.