Daily Brief: The German Government Isn’t Taking All This Inflation Lightly

Daily Brief: The German Government Isn’t Taking All This Inflation Lightly

almost 2 years ago3 mins

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Data out on Wednesday showed that German consumer prices jumped more than expected in March, even as the country’s government is forced to resort to desperate measures.

What does this mean?

Germany’s been struggling with supply issues for a while now, but these sanctions on Russia have made a bad situation even worse. Case in point: Germans had to fork out a massive 40% more on energy this month than the same time last year. And since that encouraged businesses to pass some of those costs onto customers, consumer prices came in 7.3% higher this month than at the same time last year – way above the 6.3% economists expected, and the biggest rise in prices for over 40 years.

German inflation

Why should I care?

Zooming in: Germany’s standing its ground.

Meanwhile, the German government is playing a dangerous game: it’s refusing to pay for Russia’s natural gas in rubles as requested, which risks incentivizing the country – which supplies more than half of all its natural gas – to turn the taps off altogether. And that, the government has warned, would send prices even higher, possibly even triggering a recession. So in an effort to keep that from happening, Germany initiated the first step of a series of emergency measures on Wednesday: it’s going to start monitoring the country’s energy consumption daily, and called on it to reduce usage where it could.

German gas supply

The bigger picture: Germany and the US team up.

It makes sense, then, that Germany would be trying to wean itself off Russian gas completely. And it’s just taken a big step toward doing just that: the country just announced a deal with the US that will see the country ramp up exports of natural gas to the European Union. And their plans don’t stop at gas, with the two countries saying they’ll work together on a renewable energy plan that could reduce the need for fossil fuels altogether.

Gas prices

Keep reading for our next story...

Micron Reported Better-Than-Expected Results

Micron image

Micron posted better-than-expected results this week, but America’s biggest memory chipmaker urgently needs to get its hands on neon if it wants to keep the lights on.

What does this mean?

Gone are the days when Micron relied on the slowing PC market for sales: the chipmaker made 60% more from selling its chips to industrial and data center customers last quarter than the same time the year before, and it made record sales to carmakers too. And since the chip shortage is still rearing its ugly head, Micron could up its prices without putting desperate customers off. That – along with some savvy cost-cutting on the factory floor – helped the company nearly quadruple its profit. Micron’s now confident it’s on track for a record-breaking year, and investors seemed to agree: they sent its shares up 7%.

Micron stock
Source: Google Finance

Why should I care?

The bigger picture: Micron is running out of gas.

That record-breaking year isn’t guaranteed, mind you: Micron needs neon to produce its chips, and Ukraine's two biggest suppliers of the gas – which produce about half of the world's supply – have been forced to stop operations altogether by the war. And while there’s enough in storage to keep chipmakers going for a few months, analysts think the shortfall could eventually stall production and make the chip shortage even worse.

Micron margin

Zooming out: More chips, anyone?

On the plus side, Micron did commit at the tail-end of 2021 to invest more in production to help ease the chip shortage. And rival Kioxia has just followed suit: the Japanese chipmaker announced last week that it’ll be spending $8 billion on building a new plant as soon as next year. Not that it’s doing this out of the goodness of its heart: Kioxia’s hoping the move will help it make up ground on chipmaking frontrunner Samsung.

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