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Economy in Brief

EMU HICP Drops in September Core Rate Remains in Subdued Trend
by Robert Brusca October 15, 2009

The EMU HICP fell by 0.1% m/m in September. The 12-month pace for headline inflation was -0.3%. The headline rate has not increased Yr/Yr since April. Headline inflation is choppy at a low level. Core inflation has been very steady at a 1.1% pace; it barely ticked up to 1.2% over three months in Sept.

In EMU goods sector inflation has been falling under the influence of weak oil prices aided by the impact of a rising euro exchange rate. Services prices have been steady at 1.8% but over the recent three months service sector inflation stepped down to a 1.3% pace.

The headline inflation trend across selected large EMU nations shows subdued rates. Spain and France show a hint of inflation acceleration in their sequential growth rates. Spain’s 1.9% 3-month pace is the highest in this group.

Core inflation is both stable and low across the large EMU countries. Italy alone shows some hint of acceleration with a core inflation pace of 1.9% over three months up from what has generally been a 1.5% pace for core inflation there.

On balance inflation, inflation trends inflation dynamics and inflation fundamentals appear to be very well contained in the zone. We see the inflation readings and trends above. The dynamics do not show wages or prices getting out of control across the economy. The fundamentals show constrained money and credit growth, lots of economic slack, as well as a rising exchange rate. There is little ground for the ECB to be inflation wary. The increases in global commodity prices have been well blunted by euro strength Vs the dollar.

Trends in HICP
  % mo/mo % SAAR
  Sep-09 Aug-09 Jul-09 3-Mo 6-Mo 12-Mo Yr Ago
EMU -0.1% 0.5% -0.3% 0.8% 0.8% -0.3% 3.6%
Core 0.0% 0.2% 0.0% 1.2% 1.1% 1.1% 2.5%
Goods 0.5% 0.4% -1.7% -2.9% -0.2% -1.8% 4.4%
Services -0.7% 0.2% 0.8% 1.3% 1.8% 1.8% 2.6%
 
HICP
Germany -0.3% 0.7% -0.5% -0.4% 0.4% -0.5% 3.0%
France -0.1% 0.5% -0.1% 1.1% 0.7% -0.4% 3.4%
Italy 0.4% 0.5% -0.6% 1.1% 1.5% 0.4% 3.9%
Spain -0.3% 0.7% 0.1% 1.9% 1.4% -1.0% 4.6%
Core excl Food Energy and Alcohol
Germany -0.2% 0.4% 0.1% 1.1% 1.3% 1.0% 1.7%
France -0.1% 0.3% 0.1% 0.8% 1.0% 1.2% 2.3%
Italy 0.4% 0.5% -0.4% 1.9% 1.5% 1.5% 3.0%
Spain -0.1% 0.1% 0.2% 0.7% 0.7% 0.3% 3.4%
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