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Economy in Brief

Excluding Energy German Export and Import Prices Break Through 2% Mark
by Robert Brusca July 25, 2008

The German CPI ex-energy inflation rate is still very well-behaved with inflation on that score below 2% over 12-months and nearer to 1% over three- and six-months. For the PPI ex energy trends are worsening, however. Export and import prices excluding the effects of energy – just reported - are both up by over 2% over twelve months. On shorter horizons where they are accelerating sharply, those trends may be real but since the data are not seasonally adjusted those calculations are not so reliable.

Still, what is disturbing about those trends is the clear acceleration in the ex-petrol inflation rates over those less reliable but shorter horizons.

On balance German inflation does not seem imperiled. But the ECB caps overall EMU inflation, not German inflation and as one of the more price-stable countries in the Zone Germany still posts a headline CPI that is up by 3.3% and an ex-energy result that is up by 1.9%. The ex-energy number falls below the ECB CPI cap rate, but the ECB does not have any ceiling except for the full CPI number. Perhaps behind the closed doors of the meeting room the ECB Council takes some solace in ex-energy inflation being better behaved, but not in public.

More ominously, the export and import prices for Germany – despite ongoing euro strength- suggest that more inflation pressures may be leaking in apart from energy. All in all this is not a great result for the month, although the report has its spots for those who may wish to mount an argument of optimism. I suspect the ECB and the usual band of inflation adverse German observers will see little good in this report.

German International and Domestic Inflation Trends
  % m/m % Saar
SA: Jun-08 May-08 Apr-08 3-Mo 6-Mo 12-Mo Yr-Ago
Export Prices 0.7% 0.4% 0.1% 4.9% 4.7% 2.7% 2.0%
Import Prices 2.1% 2.3% 0.4% 20.6% 13.6% 8.8% 1.4%
NSA
Exports excl-Petroleum 0.5% 0.3% 0.1% 3.4% 4.6% 2.3% 2.0%
Imports excl-Petroleum 0.5% 0.6% 0.3% 5.5% 6.3% 2.5% 1.6%
Memo: SA              
CPI 0.4% 0.5% 0.0% 3.4% 3.1% 3.3% 2.0%
CPI excl Energy 0.2% 0.0% 0.0% 0.8% 1.2% 1.9% 2.0%
PPI 1.0% 1.1% 0.9% 12.6% 9.4% 6.6% 1.8%
PPI excl Energy 0.4% 0.4% 0.2% 3.6% 4.2% 2.9% 2.8%
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