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Economy in Brief

PPI Headline Inflation Soars While ex Energy Prices Hold at a Too-High Pace
by Robert Brusca January 7, 2008

The Euro Area’s past two month’s headline gains for the PPI excluding construction were a sizeable +0.8% and +0.7%, respectively. These are huge increases. On the same period the ex-energy PPI rose by 0.1% and 0.4% a much better pairing - but still not satisfactory for the ECB. While the ECB’s inflation ceiling of 2% applies to the HICP clearly having other indices rising faster than that creates problems for price stability.

At the moment energy prices are pushing headline prices off the map. The 3-mo headline inflation gain of the E-zone PPI is 7.7% up from 4.8% over six months and 4.1% Yr/Yr. All of these figures are excessive. The core rate flattened out at 2.6% over 3-mo and 6-mo lower than the 3.2% it is up Yr/Yr. That is some encouragement but the pace of ex-energy inflation is still excessive.

Still, across countries problems linger. Excl energy inflation in Germany is decelerating, true. But in Italy and in the UK excl energy inflation is higher over three months than it was over six months. It is no wonder that the ECB continues to rattle its saber over inflation.

Euro Area and UK PPI Trends
  M/M Saar
Ezone-13 Nov-07 Oct-07 3-Mo 6-MO Yr/Yr Y/Y Yr Ago
Total excl Construction 0.8% 0.7% 7.7% 4.8% 4.1% 4.3%
Excl Energy 0.1% 0.4% 2.6% 2.6% 3.2% 3.5%
Capital Goods 0.0% 0.1% 1.0% 0.9% 1.5% 1.8%
Consumer Goods 0.3% 0.5% 5.2% 5.0% 3.6% 1.6%
Intermediate & Capital Goods 0.0% 0.3% 1.3% 1.3% 2.8% 4.5%
Energy 3.2% 1.8% 26.9% 12.3% 7.8% 6.8%
MFG 0.7% 0.5% 6.9% 4.7% 4.8% 2.9%
Germany 0.8% 0.4% 5.8% 3.2% 2.5% 4.7%
Total excl Energy -0.1% 0.4% 1.4% 1.8% 2.3% 2.9%
Italy 0.9% 0.5% 7.8% 5.2% 4.6% 5.3%
Total excl Energy 0.2% 0.3% 2.4% 2.2% 3.2% 4.2%
UK 2.2% 1.9% 22.6% 13.2% 3.1% 2.6%
Total excl Energy 0.1% 0.4% 3.2% 2.9% 3.2% 3.3%
E-zone 13 Harmonized PPI excluding Construction
The EA 13 countries are Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Slovenia
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