EMU PPI Surges Again 

August 5, 2008

By Robert Brusca

· Central banks are not having good luck with inflation. Of course, critics will say that inflation fighting has little to do with luck and that is true enough. The PPI is not a targeted rate by the ECB so in some sense it can be anything and it doesn’t matter. But we know it matters and that PPI prices feed into sectors and become costs for consumer prices so a surging PPI is not good news at all. 

 · Intermediate goods, capital goods and consumer goods prices are cycling higher again. The combination has put the headline rate (ex-construction) on an accelerated 3-Mo month high with inflation steadily stronger over 12 months, six-months and three-months. 

 · Ex energy inflation is on a new 12-mo high but the pace of inflation is not accelerating over the shorter time horizons. For example over 3-Months the ex-energy inflation rate is up at a 4.4% pace and this is below the 6-mo pace of 5.5%, that at least is some good news. 

· Inflation is entrenched across main EU/EMU countries with 3-mo headline inflation up at a 12.5% pace in Germany, 11.7% pace in France, 11.% pace in Italy and at a huge 32.2% pace in the UK. 

 · Ex energy inflation is doing better, running at a 3.9% 3-mo annualized pace in Germany and in France, 5.1% pace in Italy on that same basis and at a 12.9% pace in the UK. Yr/Yr ex-energy inflation is also well over the guidelines that the ECB or BOE would endorse. 

 · This sobering inflation news is only made somewhat more palatable by news that the EMU economy is slowing and may be slowing rapidly. Of course, ECB officials say that they can’t depend on a slower economy to bring down inflation but it likely will help to do that. It will be important to see what happens in the next several months as energy prices start to unwind and we get a chance to see how the various price indices behave without oil price pressures coursing though the pipeline. 

Euro Area and UK PPI Trends
 

M/M

Saar

Euro Area -13

Jun-08

May-08

3-Mo

6-Mo

Yr/Yr

Y/Y Yr Ago

Total excl Constructions

0.9%

1.2%

12.8%

11.1%

8.0%

2.3%

Excl Energy

0.4%

0.3%

4.4%

5.5%

4.0%

3.1%

Capital Goods

0.2%

0.2%

2.5%

3.0%

2.0%

1.9%

Consumer Goods

0.2%

0.1%

2.1%

3.6%

4.5%

1.6%

Intermediate & Capital Goods

0.4%

0.4%

5.6%

6.5%

3.8%

3.9%

Energy

2.7%

4.1%

41.9%

29.9%

21.4%

-0.5%

MFG

0.7%

1.3%

11.0%

9.5%

6.9%

2.6%

Germany

0.9%

1.0%

12.5%

10.9%

6.7%

1.7%

Excl Energy

0.3%

0.4%

3.9%

4.5%

3.0%

2.8%

France

0.7%

1.3%

11.7%

9.2%

7.3%

1.9%

Excl Energy

0.4%

0.3%

3.9%

4.7%

3.8%

2.6%

Italy

0.8%

1.5%

11.1%

10.8%

8.2%

2.7%

Excl Energy

0.5%

0.2%

5.1%

6.4%

4.2%

3.2%

UK

2.0%

2.6%

32.2%

22.0%

19.5%

1.2%

Excl Energy

0.8%

1.4%

12.9%

11.3%

7.2%

2.9%

Euro Area 13 Harmonized PPI excluding Construction

      

The EA 13 countries are Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Slovenia

  

 © 2008  HAVER ANALYTICS. All rights reserved.

 

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