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Economy in Brief

Euro Area Overall PPI Jumps: Sector Trends Diverge
by Robert Brusca September 2, 2008

The July PPI in the e-zone jumped by 1.1% in July continuing to spread inflation pressure in the e-zone. Ex energy the PPI rose by 0.5% after a 0.4% spurt in June. As a result even ex-energy inflation is looking troublesome. Ex energy e-Zone inflation is running at 4.3% Yr/Yr, at a 5.1% pace over six months and at a barely reduced 4.7% pace over three months. While this is the PPI not the ECB’s favored HICP measure, the strength in prices will not go down well at the ECB. Germany, Italy and the UK generally show accelerating patterns of headline PPI inflation as well as ex-energy inflation. Among those three only Italy does not show inflation accelerating over the recent three months compared to six months and 12-months for ex-energy inflation.

The e-zone headline inflation rate for the PPI is now up by 9% Yr/Yr compared with ex-energy inflation at 4.7%. Capital goods inflation remains subdued at 2% Yr/Yr. But consumer goods inflation is up by 4.3%. Energy prices are up 24% Yr/Yr. Inflation trends in the e-zone are like nothing the ECB would ever want to tolerate, but here they are.

E-zone and UK PPI Trends
  M/M Saar
Euro Area 15 Jul-08 Jun-08 3-Mo 6-MO Yr/Yr Y/Y Yr Ago
TotalxConstruct 1.1% 1.0% 14.2% 11.8% 9.0% 1.8%
Excl Energy 0.5% 0.4% 4.7% 5.1% 4.3% 2.9%
Capital Gds 0.2% 0.2% 2.3% 2.5% 2.0% 1.7%
Consumer Gds 0.2% 0.2% 2.3% 2.9% 4.3% 1.9%
Intermediate&Cap Gds 0.6% 0.5% 5.9% 6.3% 4.2% 3.4%
Energy 2.8% 2.8% 46.3% 33.5% 24.5% -1.8%
MFG 0.6% 0.7% 10.9% 9.6% 7.2% 2.3%
Germany 2.0% 0.9% 16.7% 13.4% 8.9% 1.1%
  ExEnergy 0.7% 0.3% 5.4% 5.1% 3.6% 2.4%
Italy 0.5% 0.8% 11.4% 10.4% 8.3% 2.0%
  ExEnergy 0.1% 0.5% 3.4% 5.1% 4.1% 3.1%
UK 0.2% 2.9% 25.3% 20.9% 20.0% 0.2%
  ExEnergy 0.5% 0.8% 11.6% 10.3% 7.6% 3.0%
Euro Area 15 Harmonized PPI excluding Construction.
The EA 15 countries are Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovenia and Spain.
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