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Economy in Brief

Inflation Breaks Lower in the Euro Area
by Robert Brusca December 2, 2008

The Euro Area PPI dropped by 0.8% in October after dropping by 0.3% in September. This drop reduced the total ex-Construction inflation rate to 6.3% Yr/Yr. Inflation has dropped to a 4.1% pace over six months and is falling at a 5.8% pace over three months. Ex-energy inflation at the PPI level also fell in October. Its pace has dropped to 3.2% over 12 months 2% over six months and minus one percent over three months. Germany , Italy and the UK each saw ex-energy inflation declining in October. Three month ex-energy inflation is also well-behaved across these three countries, falling for two of them and flat over three months in Germany . PPI inflation remains quite elevated over 12 months for headline as well for ex-energy inflation in the Zone as well as in these three key countries. But with the economy so weak the inflation overshoot is rightly being ignored. Prospects remain for inflation to fall further. Economies are weakening and spot oil has fallen below $48/bbl.

Euro Area and UK PPI Trends
  M/M SAAR
Euro Area 15 Oct-08 Sep-08 3-Mo 6-MO Yr/Yr Y/Y Yr Ago
Harmonized PPI ex Construction -0.8% -0.3% -5.8% 4.1% 6.3% 3.3%
Excl Energy -0.4% 0.0% -1.0% 2.0% 3.2% 3.2%
Capital Goods 0.0% 0.1% 1.2% 2.0% 2.2% 1.5%
Consumer Goods -0.1% -0.1% -0.1% 1.0% 2.6% 3.4%
Intermediate & Capital Goods -0.6% 0.0% -1.6% 2.5% 3.6% 3.0%
Energy -2.0% -1.0% -18.9% 9.9% 15.8% 4.3%
MFG -1.5% -0.5% -9.9% 0.1% 3.5% 3.9%
Germany 0.0% 0.3% -1.2% 7.3% 7.8% 1.7%
Germany Ex Energy -0.3% 0.1% 0.0% 2.7% 2.9% 2.4%
Italy -1.5% -0.5% -7.7% 2.0% 5.2% 3.7%
Italy Ex Energy -0.7% -0.1% -2.3% 0.8% 3.0% 3.2%
UK -4.2% -1.0% -26.7% -0.8% 11.4% 5.9%
UK Ex Energy -0.5% 0.3% -0.7% 5.6% 7.0% 3.8%
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