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Economy in Brief


by Robert Brusca New HICP is 1.9% Y/Y in June June 29, 2007

Despite the good HICP reading for EMU evidence for the month change shows some indicator of an escalation in inflation. The ECB is wary of inflation pressure. Money and credit growth - two indicators that the ECB watches - are showing signs of strength and excessive growth.

Six of 11 available EMU countries show readings on Yr/Yr CORE inflation that reveal a reading that is in excess of the 2% ceiling of the ECB. For the zone these trends are going to be weighted by each country’s importance, but the point is still valid. That is a lot of excess inflation in the zone and with the FLASH HICP just coming in a touch below the ceiling (at 1.9% compared to a ceiling of 2%). There is no room to breathe easy. Trends even suggest that there may be no room at all. Among these reports three show inflation accelerating in May compared to April (y/y) while only two show deceleration.

Three EMU countries show inflation well below the barrier as Finland and France sport Yr/Yr core HICPs of 1.4% and the Netherlands is at 1.6%. But Greece shows inflation of 3.0% Ireland has inflation of 2.8% and Luxembourg of 2.8%. In these comparisons it is the larger countries that are behaving and the smaller countries that are behaving worse. Still, the ECB has inflation on a razor’s edge just below its ceiling. There can be little comfort about this situation at the central bank.

Ezone & Friends: Core Inflation Yr/Yr
Core HICP May-07 Apr-07 Mar-07 Feb-07 Jan-07 Dec-06 Nov-06
Austria 2.0% 1.6% 1.8% 1.7% 1.6% 1.5% 1.5%
Belgium 1.9% 2.0% 2.0% 1.7% 1.6% 1.6% 1.5%
Finland 1.4% 1.4% 1.4% 1.3% 1.2% 1.0% 1.0%
France 1.4% 1.4% 1.3% 1.4% 1.4% 1.5% 1.4%
Germany 2.1% 1.9% 1.7% 1.8% 1.7% 1.0% 1.1%
Greece 3.0% 3.1% 3.5% 4.0% 3.6% 3.4% 3.3%
Ireland 2.8% 2.8% 3.0% 2.9% 2.5% 2.8% 2.4%
Italy 1.9% 1.8% 2.0% 2.1% 1.7% 1.9% 1.8%
Luxembourg 2.8% 2.7% 2.4% 2.4% 2.4% 2.3% 2.2%
The Netherlands 1.6% 1.7% 1.6% 1.0% 1.0% 1.1% 1.0%
Portugal #N/A 2.4% 2.0% 2.0% 2.0% 2.1% 2.2%
Spain 2.5% 2.5% 2.5% 2.8% 2.8% 2.5% 2.7%
Core HICP/CPI              
UK (HICP) 2.2% 2.1% 2.1% 1.9% 1.8% 1.9% 1.7%
US 2.3% 2.4% 2.5% 2.7% 2.7% 2.6% 2.6%
Japan -0.3% -0.2% -0.4% -0.3% -0.2% -0.3% -0.2%
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