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Economy in Brief

German Ex-Energy PPI Shows Disconcerting Pressure!
by Robert Brusca March 20, 2008

German ex-energy MFG prices are showing pressure with three-month inflation surging and pushing up the pace across the major tenor comparisons. Headline MFG price inflation is in the 5% to 6% range over three and six months. It is still at 3.7% year/year much more than its year/year pace of 2.9% one year ago. Inflation’s acceleration is deeply rooted for the MFG headline rate.Ex-energy prices have less of a structural problem and more of a rising cyclical issue. Year/year ex-energy inflation is at 2.6%. A year ago ex-energy inflation was stronger at 3%; ex-energy inflation decelerated further to 2.3% over six months. But the recent three-month pace at 3.6% is a decided acceleration. As you can see on the chart this is a reversal of a decelerating trend that had been in place. January and February ex-energy price have brought more pressure. This is going to be disconcerting to the ECB that is worried about second round effects on inflation.

Germany PPI
  %m/m %-SAAR
  Feb-08 Jan-08 Dec-07 3-mo 6-mo 12-mo 12-moY-Ago
MFG 0.6% 0.5% 0.2% 5.0% 6.0% 3.7% 2.9%
Ex Energy 0.4% 0.4% 0.1% 3.6% 2.3% 2.6% 3.0%
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