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Economy in Brief

German Export and Import Prices Show Mixed Trends: Pick Your Horizon
by Robert Brusca May 28, 2008

Near term pressures: The German CPI and PPI may have slammed on the brakes in April but export and import prices are still advancing- even ex-energy. The German PPI is generally unruly but the CPI has flattened out over three months with an annual rate of gain of 1.9% and an ex-energy reading of just 1.2%. German export prices in the past three months are up at a 2.6% rate and imports at a 5.1% rate – those numbers are not acceptable. While they are not-seasonally-adjusted, German ex petroleum import prices are up at a 4.7% annual rate – over three-months -- and that is not much of an improvement over the import headline pace. Moreover, the sequential growth rates show acceleration in the ex-petrol import price trend, 12-Mo to 6-Mo to 3-Mo, just as for the PPI ex-energy. Even so, ex-energy CPI prices are decelerating on this series of measures.
Some progress but not enough: Yr/Yr comparisons show a very different story, at least for ex-energy prices. German CPI prices are up by 2.5% overall and by 1.8% ex energy. For imports the total Yr/Yr gains is 5.6% with an ex energy rise of just 1.5%. The chart above shows that the key German prices Yr/Yr ex-energy all are below the 2% magic number dictated by the ECB –that is except for the PPI. The ECB, however, does not recognize any other target or ceiling for inflation except for the HCIP headline rate and there the ceiling rate is 2% PERIOD.

Are the pressures peaking? Yr/Yr gains in the CPI ex-energy peaked in December of 2007. Ex petrol import prices peaked in August of 2006. Even the Yr/Yr PPI ex petrol prices shows signs of peaking in the last few months. Of course with oil prices having spurted again it is too soon to tell how robust this phenomenon will prove to be. For the time being year-over-year inflation trends, at least in Germany, seems to reveal the symptoms of being contained. And the ECB, like the Fed in the US, seems to prefer gauging inflation on its Yr/Yr performance instead on a shorter annualized pace. Still, inflation is too high on the all-important headline measures to let the ECB breathe freely. Moreover, the ECB has other countries to worry about besides Germany. Germany is making a solid contribution to an improved EMU rate of inflation but problems in the zone continue to linger and perhaps to fester.

German International and Domestic Inflation Trends
  % m/m % Saar
SA; Apr-08 Mar-08 Feb-08 3-Mo 6-Mo 12-Mo Yr-Ago
Export Products 0.1% 0.1% 0.5% 2.6% 3.2% 2.2% 1.9%
Import Products 0.4% 0.0% 0.9% 5.1% 7.5% 5.6% 0.5%
Export excl Petroleum 0.1% 0.2% 0.6% 3.4% 2.8% 1.7% 2.1%
Import excl Petroleum 0.3% 0.0% 0.9% 4.7% 3.5% 1.5% 1.8%
Memo: SA              
CPI 0.0% 0.4% 0.1% 1.9% 2.7% 2.5% 2.1%
  CPI excl Energy 0.0% 0.3% 0.0% 1.2% 1.5% 1.8% 2.1%
PPI 0.9% 0.5% 0.6% 8.1% 7.7% 5.2% 1.6%
  PPI excl Energy 0.2% 0.4% 0.4% 4.0% 3.1% 2.7% 2.9%
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