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Economy in Brief

Euro area PPI ex Energy is Excessive but Slowly Behaving
by Robert Brusca September 4, 2007

The EMU ex-energy PPI inflation rate is excessive. It is up by 0.2% in the month and at a 2.4% pace over three-months. Still over six-month its pace had been 3.2%. That deceleration is a hopeful sign, but it still leaves the pace of the PPI above the Yr/Yr inflation rate of 2.9%. In any event the ECB inflation guideline is for inflation below 2%; having the PPI running at a pace in excess of that is not helpful.

All main sectors three-month inflation rates are above the 2% ceiling except for capital goods. The overall pace of ex-energy inflation is 2.4% for three months and 2.9% Yr/Yr. For Germany and Italy ex energy inflation is lower Yr/yr compared to the year previous period and the 3-month inflation rates each are lower that their respective six month counterpart rates. In the UK Yr/Yr ex-energy inflation is steady at 3% but over three months ex-energy inflation is lower at 2.5%.

The situation for W. Europe seems to be that inflation is on its way to behaving if only at a slow pace. Still that is something and with the weakness and concerns about subprime and the financial sector that just might be enough to help to keep the ECB’s next rate hike at bay.

Euro area and UK PPI Trends
  M/M SAAR
Euro area 13 Jul-07 Jun-07 3-Mo 6-MO Yr/Yr Y/Y Yr Ago
Total ex Construction 0.3% 0.1% 2.8% 3.7% 1.8% 6.0%
Excl Energy 0.2% 0.1% 2.4% 3.2% 2.9% 3.5%
Capital Goods 0.1% 0.0% 0.6% 1.1% 1.7% 1.6%
Consumer Goods 0.3% 0.2% 2.8% 2.6% 1.8% 1.9%
Intermediate & Capital Goods 0.1% 0.1% 2.2% 3.5% 3.5% 4.3%
Energy 0.5% -0.1% 4.3% 5.6% -1.9% 14.8%
MFG 0.3% 0.2% 4.1% 5.6% 2.3% 4.3%
Germany -0.1% 0.2% 1.7% 2.0% 1.1% 6.0%
Germany ex Energy 0.1% 0.2% 1.8% 2.8% 2.4% 3.0%
France #N/A 0.2% #N/A #N/A #N/A 4.0%
France ex Energy #N/A 0.1% #N/A #N/A #N/A 2.9%
Italy 0.4% 0.1% 3.7% 4.6% 2.1% 7.0%
Italy ex Energy 0.3% 0.1% 2.8% 3.3% 3.2% 4.0%
UK 0.6% 0.6% 5.9% -1.6% 0.4% 9.8%
UK ex Energy 0.4% 0.1% 2.5% 3.3% 3.0% 3.0%
Euro area 13 Harmonized PPI excluding Construction.
The Euro area 13 countries are Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain and Slovenia.
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