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Economy in Brief

PPI Pressures Begin to Spread in Germany
by Robert Brusca June 23, 2008

Price trends deteriorate
Manufacturing prices were up strongly in May. All major divisions of the PPI are showing some pressure even capital goods inflation is rising. Core PPI prices are up by 2.9% Yr/Yr and at a faster paced 3.6% over three-and six-months.

Inflation accelerates
At least the acceleration in consumer prices where inflation has been the virulent has begun to slow. Yet, over the past year the Yr/Yr inflation rate has accelerated by four percentage points while Core PPI inflation has accelerated by 0.3 percentage points.

Why it matters…
While the ECB’s inflation ceiling applies to HICP prices only, the worry from the ECB’s standpoint is that producer price inflation could become embedded in prices at the consumer level.

Germany PPI
  %m/m %-SAAR  
  May-08 Apr-08 Mar-08 3-mo 6-mo 12-mo 12-moY-Ago IN Q1
MFG 1.1% 0.9% 0.5% 10.5% 7.7% 5.9% 1.9% 8.3%
Ex Energy 0.4% 0.2% 0.4% 3.6% 3.6% 2.9% 2.6% 4.1%
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