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Economy in Brief

Euro-Area PPI Takes Off Slowly I Turn... Err Scratch That
by Robert Brusca June 2, 2010

Producer price trends have been rising sharply in EMU over the past few months. The PPI has taken a decided and sharp turn for the worse. Prices are accelerating in two of the three main sectors of the PPI. Only consumer prices fail to show acceleration from three-months to six months. Consumer prices and intermediate prices are still lower Yr/Yr but their trends are nonetheless rising sharply. Intermediate goods prices are up very strongly from past weakness.

Germany and France show manufacturing prices ex-energy or ex-energy and ex-food trends (the former for Germany, the latter for France) with accelerations in train. UK manufactures prices are accelerating (the UK is an EU member). Italy’s prices are actually decelerating over three months compared to stronger pressures earlier.

While the PPI is not the price a gauge of choice for the ECB, having such pressures stirred up will not be good news. The dropping euro undoubtedly has something to do with this.

Still Yr/Yr prices are contained for consumer goods and capital goods. Intermediate goods prices are the biggest problem. There the rise in the dollar price of oil and the dropping euro form a double-whammy on prices. If these trends develop in the HICP they will put the ECB on the spot since growth in the Zone is not doing well and the ECB will not want inflation trends like this to take hold in consumer prices.

Euro-Area and UK PPI Trends
  M/M Saar
Euro-Area Apr-10 Mar-10 3-Mo 6-MO Yr/Yr Y/Y Yr Ago
TotalxConstruct 0.7% 0.6% 5.8% 6.4% 2.8% -4.7%
Capital Gds 0.2% 0.1% 1.1% 0.4% -0.2% 1.2%
Consurmer Gds 0.1% 0.0% 0.5% 0.7% -0.3% -1.7%
Intermediate&Cap Gds 1.0% 0.8% 8.1% 6.8% 2.7% -5.1%
MFG 0.4% 0.6% 3.9% 6.2% 3.7% -5.9%
Germany
  Gy ExEnergy 0.5% 0.2% 4.3% 3.1% 1.1% -1.9%
France:Tot
  Fr ExF&Energy 0.6% 0.3% 4.2% 3.3% 1.0% -1.6%
Italy 0.5% 0.5% 3.7% 6.7% 4.1% -6.2%
UK 0.9% 0.6% 8.1% 7.1% 5.8% 1.3%
Euro-Area Harmonized PPI ex construction
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