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Economy in Brief

PPI Points Way Higher for Euro Area Inflation
by Robert Brusca October 2, 2009

August’s EMU PPI excluding construction rose by 0.7% following a drop of 0.9% in July. Still the three-month growth rate (annualized) is now positive at 0.7% the six month growth rate is at -3.9% and the 12-month growth rate is at -7.6%. Inflation is gaining a toe hold again in EMU at the producer price level. The ECB ahs a ceiling arrangement for the HICP only (harmonized index of consumer inflation).

Even so, inflation does not appear to be cooking in any sense of the word. For consumer goods, prices were still flat in August and, at -0.3%, the three month growth rate for consumer goods is still close to its six month annualized pace at -0.6%. There is no pressure there. Capital goods prices continued to fall in August dropping by 0.1%. Over three months, capital goods prices are falling by 0.8%; that is a slight but only a slight improvement from dropping by 1.4% at an annual rate over six months. There is not much inflation pressure from capital goods prices either.

Virtually all the inflation pressure in the PPI is coming from industrial supplies or intermediate goods. Intermediate goods prices rose by 0.4% in August. They are also up at a 1.1% annual rate over three months and down at an annual rate of 3.6% over six months.

Across EMU countries the headline PPI rose in all of the largest of them. Ex food and energy prices rose in Germany and in France as well. For all these price measures, the August rise is balanced by a drop in July.

Still the bottom line is that prices are on the move again. While it does not look like the pressures are very widespread across commodity classifications or very intense, the pressure seems quite real and widespread cross the larger EMU nations.

Euro Area and UK PPI Trends
  M/M Saar
Euro Area Aug-09 Jul-09 3-Mo 6-MO Yr/Yr Y/Y Yr Ago
Total excl Constructions 0.7% -0.9% 0.7% -3.9% -7.6% 8.3%
             
Capital Goods -0.1% -0.1% -0.8% -1.4% -0.2% 2.4%
Consumer Goods 0.0% 0.0% -0.3% -0.6% -2.6% 4.2%
Intermediate & Cap Goods 0.4% -0.1% 1.1% -3.6% -7.4% 5.4%
             
MFG 1.0% -0.5% 4.1% -0.7% -7.1% 6.8%
Germany 0.5% -1.6% -6.8% -9.4% -7.6% 8.1%
Germany excl Energy 0.3% -0.2% 0.0% -1.9% -3.3% 3.2%
France  0.7% -0.4% 4.0% -2.9% -8.4% 7.7%
France excl Food & Energy 0.1% -0.3% -1.1% -2.6% -3.6% 3.4%
Italy 0.9% -0.9% 1.1% -2.8% -7.8% 8.1%
UK 2.5% -1.7% 6.2% 1.0% -6.5% 21.9%
Euro Area Harmonized PPI ex construction
The EA 13 countries are Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Slovenia
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