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Economy in Brief

Euro Area Inflation Is Still Dropping Fast
by Robert Brusca April 6, 2009

EMU inflation drops at record pace in February. EMU inflation dropped in February after a very sharp drop in January. Over three-months the annual pace of decline is at -12% compared to -11% over six-months. This is a strong pace to stay in force over these two periods. Over 12-months, inflation is off by 1.8% compared to being up by 5.3% Yr/Yr one year ago. Thus average inflation over the past two years is quite tame, under two percent.

A job well done…but. Central banks can be content that despite all the angst, they handled the energy price spurt well and did manage to keep inflation at bay. Still, inflation is well under control and last week ahead of the G-20 meeting, the ECB gave the markets a smaller rate cut than they had anticipated. Now with the inflation numbers still showing declines the ECB is expected to be cutting rates again.

Widespread drops, too. Inflation is falling in Germany and in Italy at about the same pace as in EMU over the last 3 and 6 months. The UK has inflation falling fast over six months but the pace of decline has let up over the past three-months.

Euro Area and UK PPI Trends
  M/M Saar
Euro Area Feb-09 Jan-09 3-Mo 6-MO Yr/Yr Y/Y Yr Ago
Total ex Construction -0.6% -1.5% -12.0% -11.2% -1.8% 5.3%
             
Capital Goods 0.0% -0.2% -0.6% 0.6% 1.7% 1.6%
Consumer Goods -0.2% -0.8% -5.0% -3.6% -0.5% 4.7%
Intermediate & Capital Goods -1.1% -1.9% -15.4% -11.9% -3.1% 4.2%
             
MFG -0.5% -1.0% -11.7% -12.9% -3.9% 5.5%
Germany -0.7% -1.4% -12.5% -5.9% 2.1% 2.7%
Gy Ex Energy -0.6% -0.6% -6.6% -5.1% -0.7% 2.2%
Italy -0.8% -0.9% -12.0% -13.1% -3.3% 6.3%
UK 0.4% 0.7% -5.2% -14.7% 2.1% 13.1%
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