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Economy in Brief

EMU Inflation Trends Show Success and Reason to be Wary…
by Robert Brusca July 13, 2007

The accompanying charts show those EMU countries for which we have an early read on June inflation. Finland, Belgium and France show rates of change below the 2% mark. Germany, Italy and The Netherlands are also below the 2% ceiling, but by the skin of their teeth. Luxembourg and Spain are over the top.

It is heartening to see that some of the larger countries have the lower rates of inflation. And for most the pattern is clear. An oil price shock cranked up the inflation rates, but afterward those rates have come back down and are for the most part tolerably closer to the ECB’s ceiling.

Still only France has an extended period in which its year/year pace has been consistently well below the ceiling pace of 2%. Finland’s and Belgium’s rates have just fallen into a more comfortable part of the zone recently. The Netherlands rate has recently risen toward the ceiling. While Germany and Italy are technical successes they have no reassuring history for us. Belgium and Luxembourg show no tendency to do better.

So it is quite understandable that the ECB would be wary in such an environment.

Trends in HICP
  % mo/mo % saar
  Jun-07 May-07 Apr-07 3-Mo 6-Mo 12-Mo Yr Ago
EMU-13 #N/A 0.2% 0.4% 3.0% 2.4% 1.9% 2.5%
Core #N/A 0.2% 0.3% 3.1% 2.5% 1.9% 2.4%
Goods #N/A 0.2% 0.8% 9.0% 3.2% 1.4% 2.9%
Services #N/A 0.2% 0.4% 2.6% 3.9% 2.6% 1.8%
HICP              
Germany 0.2% 0.2% 0.4% 3.1% 3.0% 2.0% 2.0%
France 0.2% 0.2% 0.4% 3.6% 1.7% 1.3% 2.2%
Italy 0.3% 0.3% -0.1% 1.9% 1.9% 1.9% 2.4%
UK #N/A 0.1% 0.0% #N/A #N/A #N/A 2.5%
Spain 0.3% 0.3% 0.3% 3.4% 3.3% 2.4% 3.9%
Core: xFE&A            
Germany #N/A 0.3% 0.3% 2.0% 2.2% 2.1% 0.6%
France #N/A 0.1% 0.3% 2.1% 1.4% 1.4% 1.3%
Italy #N/A 0.2% 0.0% 2.0% 1.8% 1.9% 1.7%
UK #N/A 0.3% 0.0% 2.4% 2.2% 2.2% 1.3%
Spain #N/A 0.1% 0.3% 2.0% 2.7% 2.5% 3.1%
Blue shaded area data trail by one month        
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