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Economy in Brief

Germany: Ex-Energy Inflation Trends are Turning Lower International Prices First
by Tom Moeller October 25, 2007

Domestic inflation is the more nettlesome here…

The less than one year in duration statistics in the table below are not as meaningful for export and import prices as they are not seasonally adjusted. But overall the trends in the table and in the chart show that inflation is in pretty good shape. Nonpetroleum inflation is keeping its head down. The reference line on the chart drawn at 2% shows that only the nonpetroleum PPI and CPI prices are edging above it. History shows us that when international prices turn lower that does not translate quickly into domestic prices becoming calm. In 2001 when import prices fell sharply it took about one year before the domestic ex-energy CPI responded.

Of course what happens with oil prices and with food prices does matter. We focus on ex energy prices mostly to rid ourselves of the volatility, but at the same time we see that it provides coherence in the relationships among domestic and international prices of various sorts.

German International and Domestic Inflation Trends
  % m/m % Saar
SA: Sep-07 Aug-07 Jul-07 3-Mo 6-Mo 12-Mo Yr-Ago
Export Prices -0.1% 0.1% -0.1% -0.4% 1.3% 1.6% 2.3%
Import Prices 0.6% -1.3% 0.1% -2.6% 3.2% 1.3% 3.7%
Exp excl Petrol 0.0% 0.0% 0.1% 0.4% 1.1% 1.5% 2.5%
Imp excl Petrol -0.2% -0.1% -0.4% -2.7% -0.8% -0.2% 4.6%
Memo: SA              
CPI 0.3% 0.1% 0.3% 2.5% 2.7% 2.4% 1.0%
CPI excl energy 0.3% 0.2% 0.2% 2.6% 2.4% 2.0% 1.0%
PPI 0.1% 0.2% -0.1% 0.7% 1.7% 1.5% 5.1%
PPI excl Energy 0.0% 0.4% 0.1% 1.8% 2.7% 2.5% 2.9%
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