German Producer Prices Rise 0.5% in January Amid Economic Struggles
Germany’s producer prices rose by 0.5% year-on-year in January 2025, marking the third consecutive month of producer inflation, according to the Federal Statistical Office (Destatis). However, the figure fell short of analysts’ expectations of 1.3% and was lower than December’s 0.8% increase—the highest in a year and a half.
The uptick was mainly driven by higher costs for non-durable consumer goods, which rose 3% compared to January 2024. Prices of durable consumer goods increased 1.1%, while capital goods saw a 1.9% rise, fueled by higher machinery, trailers, motor vehicles, and semi-trailer costs.
In contrast, energy prices dropped by 1% annually due to falling costs of natural gas, electricity, and district heating, although mineral oil products became more expensive. Excluding electricity, producer prices rose by 1.2% year-on-year. On a monthly basis, prices fell 0.1% in January, the same decline as in December, but below market forecasts of 0.6%.
Ongoing Economic Challenges
Germany’s economy continues to face challenges, contracting by 0.2% in 2024—its second consecutive year of negative growth. The downturn has been attributed to high energy costs, weak export demand, increased global competition, and geopolitical uncertainties.
Political instability has further compounded the situation. The coalition government collapsed in late 2024 after Chancellor Olaf Scholz dismissed Finance Minister Christian Lindner, leading to a confidence vote that Scholz lost.
Additionally, concerns over potential US tariffs under President Donald Trump’s administration have heightened worries about the economic outlook for both Germany and the European Union. In 2023, Germany’s top exports to the US included cars, vaccines, and medicaments, while key imports from the US were cars, crude petroleum, and gas turbines, according to the Observatory of Economic Complexity.
Economic Outlook: Growth Expected to Return
Despite the recent challenges, Germany’s economy is projected to recover gradually. Gross domestic product (GDP) is expected to grow by 0.7% in 2025 and 1.3% in 2026, while inflation is forecast to average 2.1% this year before easing to 1.9% in 2026.
In its latest economic forecast, the European Commission expressed optimism about Germany’s recovery. “Construction is set to resume growth in early 2025, driven by recovering demand for housing and infrastructure,” the Commission stated. It also noted that recent tax incentives for investment, introduced in July 2024, are expected to boost equipment investment.
“Domestic demand is forecast to become the main driver of economic growth in 2025 and 2026,” the Commission added. However, it warned that elevated energy costs will continue to impact the competitiveness of energy-intensive industries. Meanwhile, the contribution of net exports is expected to be slightly negative in 2025 and neutral in 2026, despite an anticipated increase in demand from Germany’s main trading partners.
Business
Apple Halts Advanced Data Protection in UK After Government Demand for Access
Apple is removing its top-tier data encryption feature, Advanced Data Protection (ADP), from UK users following a government request for access to user data. The decision means that Apple customers in the UK will no longer be able to activate ADP, which ensures that only account holders can access their iCloud-stored content through end-to-end encryption.
The UK government made the request earlier this month, seeking the ability to access encrypted data under the Investigatory Powers Act (IPA), which mandates that companies must provide information to law enforcement agencies upon request. While Apple has consistently resisted creating encryption backdoors, citing potential misuse by cybercriminals, the company confirmed it would disable ADP activation in the UK starting Friday at 3 p.m. GMT. Existing users will also lose access at a future date.
“We are gravely disappointed that UK customers will no longer have access to this security feature,” Apple said in a statement. “We have never built a backdoor or master key into our products and never will.”
The Home Office declined to comment on the specific order, stating, “We do not comment on operational matters.”
Cybersecurity experts have criticized the government’s move, arguing that it undermines online privacy. Professor Alan Woodward of Surrey University called the decision “an act of self-harm” that weakens security for UK users. “It was naïve of the UK government to think they could dictate terms to a US technology company on a global scale,” he added.
The development has sparked backlash from privacy advocates, who describe the order as an “unprecedented attack” on individual privacy. Concerns have also emerged in the United States, where two senior politicians warned that the UK’s demands could jeopardize intelligence-sharing agreements between the two countries.
Despite the removal of ADP in the UK, the feature will remain available to users in other countries, raising questions about the global impact of the UK’s IPA order. In its statement, Apple emphasized its commitment to user privacy and expressed hope that it could restore ADP in the UK in the future. “Enhancing the security of cloud storage with end-to-end encryption is more urgent than ever before,” the company stated.
This latest dispute highlights growing tensions between governments seeking access to encrypted data and technology companies prioritizing user privacy, with potential implications for international regulatory frameworks and cross-border data security.
Business
European PMI Data Reveals Mixed Economic Signals
February economic data across Europe showcased divergent trends, with the UK’s services sector seeing growth, Germany’s manufacturing hitting a two-year high, and France continuing to face challenges.
The flash estimate for France’s HCOB Manufacturing PMI rose to 45.5 in February from 45 in January, according to S&P Global. While still indicating contraction, this was the mildest decline since May 2024. The services sector, however, fell more sharply, with its PMI dropping to 44.5 from 48.2, driving the composite PMI to 44.5—the steepest contraction since September 2023. Economist Dr. Tariq Kamal Chaudhry of Hamburg Commercial Bank noted that shrinking order intakes and subdued future activity expectations remain key concerns.
In contrast, the UK’s services sector expanded, with its PMI rising to 51.1 from 50.8, surpassing analyst expectations. Despite this growth, new work fell at the fastest rate since November 2022 due to weakened business investment and budget cuts. The UK manufacturing sector continued to contract, with its PMI falling to 46.4 from 48.3, missing market forecasts.
Germany’s manufacturing PMI climbed to 46.1, its highest in two years, supported by slower declines in factory output. Meanwhile, the services sector experienced a slight dip, with its PMI at 52.2 compared to 52.5 in January. Overall, Germany’s private sector remains affected by manufacturing challenges, though the pace of contraction has slowed.
Across the eurozone, the composite PMI held steady at 50.2, signaling marginal growth but falling short of expectations. The manufacturing PMI rose to 47.3 from 46.6, while the services PMI dropped to 50.7 from 51.3. Kyle Chapman, FX markets analyst at Ballinger Group, noted that while modest growth is preferable to contraction, consumer caution due to political and economic uncertainty continues to limit recovery.
In the UK, Chapman pointed to the impact of rising payroll taxes on employment, with one-third of surveyed companies linking lower staffing levels to the October budget. Weak demand and stagnant productivity levels are further hindering the country’s economic performance.
The latest PMI data highlight the complex economic landscape in Europe, with some sectors showing signs of resilience while others grapple with ongoing challenges, influenced by both domestic policies and broader global conditions.
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