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Economy in Brief

German Core Inflation Breaks Lower - is it for real?
by Robert Brusca September 14, 2007

German inflation trends are mixed but on balance softer, kinder.

Inflation trends in Germany are cooling for both the core and headline in terms of their respective sequential rates of growth. The diffusion calculations at the table bottom look at accelerating Vs decelerating trends. A diffusion value above 50% shows more acceleration while below 50% shows less. While inflation has accelerated Yr/Yr over six months and three months it is ratcheting lower. The drop in Germany inflation’s pace seems to be authentic. As the Euro area's strongest economy and one where growth is also export-led, we should wonder how much of this is being induced by the strength of the euro. We have seen already reports of irregular output and sharply reduced orders growth in Germany. Is that the price Germany is paying for having such good inflation results?

German HICP and CPI details
  Mo/Mo % Saar % Yr/Yr
  Aug-07 Jul-07 Jun-07 3-Mo 6-Mo 12-Mo Yr Ago
HICP Total -0.1% 0.2% 0.2% 1.2% 1.8% 2.0% 1.7%
Core 0.1% 0.2% 0.1% 1.6% 1.8% 2.2% 0.8%
CPI
All 0.1% 0.3% 0.1% 1.8% 2.7% 2.0% 1.7%
CPI excl Food & Energy 0.2% 0.1% 0.1% 1.5% 2.0% 2.0% 0.8%
Food 1.1% 0.6% 0.1% 7.2% 4.3% 2.4% 2.6%
Alcohol 0.0% 0.0% 0.3% 1.1% 1.7% 2.1% 2.0%
Clothing & Shoes -0.4% -0.6% -0.2% -4.8% -3.2% 0.9% -0.8%
Rent & Utilities 0.1% 0.2% 0.2% 1.8% 1.4% 1.4% 2.7%
Health Care 0.4% 0.4% 0.5% 5.2% 3.0% 1.4% 1.0%
Transport -0.9% -0.1% 0.0% -3.9% 2.7% 1.9% 2.8%
Communication 0.1% -0.3% -0.2% -1.7% -0.4% 0.7% -3.7%
Recreation & Culture -1.1% 1.3% -0.1% 0.4% -0.6% 0.8% -0.4%
Education 0.8% -0.1% 0.3% 4.1% 61.2% 28.7% 2.5%
Restaurant & Hotel 0.0% 0.0% 0.0% 0.0% 1.6% 2.6% 1.0%
Other 0.2% 0.1% 0.2% 1.8% 1.4% 2.3% 0.9%
Diffusion -- -- -- 45.5% 36.4% 72.7% --
Type: Diffusion: Current Compared to 6-mo 12-mo Yr-Ago --
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