The EMU ex construction PPI chart shows a clear pattern of acceleration. The PPI (excluding construction) has a 3-month rate in excess of its six-month pace that is, in turn, above the Yr/Yr pace. That is acceleration by definition. All measures are well above the hypothetical ceiling rate of inflation of 2% (that ceiling applies to the HICP alone, however). Still, having PPI inflation at this strong of a pace must be disconcerting to the ECB.

More disconcerting is for ex-energy inflation to show that same sort of accelerating pattern: 3-month inflation, at 3.4%, exceeds 6-month inflation, at 3%, and that pace is only a tick below the 12-month pace at 3.1%. All of these speeds are above the 2% mark and therefore excessive.

These sorts of ‘cost pressures’ in turn feed into the CPI in a way that is unhealthy. It is hard for the CPI (HICP) to maintain a sub 2% pace if the things that go into it, or that underlie it, are speeding ahead faster. Consumer goods inflation is a major culprit with inflation on a steady sequential acceleration and a three-month pace of 6.4%. Of course energy and all its pressures are embodied in that measure. Intermediate goods inflation has been quieting down with the opposite tendency, revealing deceleration with inflation below 2% over the recent three months at 1.7%. Capital goods inflation is at 1.1% and also has been decelerating, but not uniformly.

Among the larger EU countries, Germany shows overall and Ee-energy PPI inflation that is excessive and accelerating. Italy shows an excessive and accelerating PPI and an ex-energy inflation that is over the 2% mark but not worsening. The UK shows a greatly accelerating headline PPI while ex-energy producer price pressures are clear but a bit less strident.

On balance, the ECB has a PPI report that will give it little sense of relief. The EMU PPI components make inflation appear a bit more like it is a consumer sector problem in the main. That is curious since that has been such a weak sector in EMU while the capital goods sector has been vibrant and yet there inflation remains tame and is ensconced well within its preferred range. All this leave the ECB in a quandary that only worsens when you look at the foreign exchange market and consider, too, the loss of momentum growth has been seeing in the region.