Germany's Wholesale Inflation Still Elevated Despite Tax Cut

Germany's wholesale prices fell 0.6% in May from the prior month, a drop driven largely by a reduction in the energy tax on petroleum products. That category declined 7.3% on the month. The prior reading showed a 2.0% rise.

Compared with the same month a year earlier, wholesale prices remain markedly higher. Petroleum products cost 30.5% more than in May 2025, even after the monthly decline. Non-ferrous ores, metals, and semi-finished metal products also fell 0.4% on the month. Their annual increase sits at 36.1%.

The persistent annual wholesale inflation reflects higher energy and raw material costs tied to the Middle East conflict. Those pressures have built over months and continue to push through the price pipeline. For the European Central Bank, this data reinforces the case for caution on rate cuts. Wholesale prices influence producer costs and, over time, consumer inflation. The ECB's July decision will factor in whether this monthly drop is a one-off from the tax adjustment or the start of a broader trend.

EUR/USD showed little immediate reaction to the print, a single data point in a busy session. The broader narrative for the pair is taking shape around policy divergence. US data has softened, giving the Federal Reserve room to consider cuts. European inflation data remain sticky. This wholesale price report points to the ECB's path to easing as unresolved, offering the euro some support against the dollar. See the EUR/USD profile for key levels.

The next German producer price index release will provide more detail on pipeline pressures. The ECB meeting in July and any fresh developments around Middle East energy supply risks will be the larger drivers for the euro in the weeks ahead.