The EMU PPI has turned up in October pushing the three month headline PPI series to an annual rate gain of 4.1%. Main categories (independently seasonally adjusted) all show declines in October while the headline (ex construction) series is up.

Inflation in Germany, France, Italy and the UK rose this month. Only German core PPI inflation fell

Only Germany has persistently declining Inflation as its 3-mo, 6-mo and 12-mo inflation rates all are falling. Even so, German core inflation is showing a steady menu of higher increase across its sequential growth rates and its headline pace, despite dropping, is dropping by less and less as we shorten the horizon for inflation calculation. That means that despite its persistent declines even German headline inflation is seeing upward pressures embedded those ongoing but diminishing declines. French headline and core rates are accelerating as are the headline rates for Italy and the UK. The recent UK inflation result is eye-popping.

On balance the Euro Area has some inflation cooking. It is on simmer but Europe is not Japan and has no deflation problem. For the most part the inflation that is appearing seems to be healthy after a period of extended price declines and in an economy that needs to begin to post some growth in the aftermath of asset price drops. Italy and UK inflation rates are uncomfortably high. But headline inflation is being buffeted by energy prices and may not be indicative of true inflation pressures at all. PPI inflation is notoriously volatile. The ECB looking more closely at the HICP, yet this report will not go unnoticed.