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Economy in Brief

Euro-Area Inflation Ticks Up But Is Still Well-Behaved
by Robert Brusca   September 15, 2010

Overall inflation ticked up to 0.4% (m/m) in August. But trends remain very much subdued in the Zone. Core inflation rose by 0.2% in August and by 0.1% in July.

Broader trends signal no damage. Three month headline inflation descended to a 1.5% annual rate, lower than its six-month, or 12- month, annualized pace. The core reading has crept up to a 1.8% pace, higher than its 1.6% six-month rate and higher than its 1% 12-month rate. This measure shows steadily but only slowly creeping inflation with a peak that is still below the ECB's trigger point of 2%.

Perhaps at another time the ECB might be more worried about the creeping core inflation rate even though it professes only to place limits on the headline series.

But recently a drop in orders, output and now a drop in expectations in Germany, the Euro-Area's hot economy, may have policymakers thinking that the economy itself is cooling without any extra help for policy.

The degree of inflation in the zone seems very, very mild. Monetary indicators as well seem to be very tame. But, it is the slowing in the economy that probably is best able to shunt aside any fears of inflation and stave off any calls for monetary action.

Trends in HICP
  % Mo/Mo % SAAR
  Aug-10 Jul-10 Jun-10 3-Mo 6-Mo 12-Mo Yr Ago
EMU 0.4% 0.1% -0.1% 1.5% 1.8% 1.6% -0.2%
  Core 0.2% 0.1% 0.1% 1.8% 1.6% 1.0% 1.2%
Goods 0.1% -1.2% -0.1% -4.6% 2.4% 1.7% -1.5%
Services 0.3% 0.9% 0.2% 5.4% 3.3% 1.4% 1.8%
HICP
Germany 0.2% 0.1% -0.1% 0.7% 1.3% 0.9% 0.0%
France 0.0% 0.1% -0.1% 0.4% 0.6% 1.6% -0.2%
Italy 0.5% -0.1% 0.0% 1.5% 2.0% 1.7% 0.1%
UK 0.3% 0.1% 0.1% 1.8% 2.3% 3.2% 1.5%
Spain 0.4% 0.5% -0.1% 3.2% 2.4% 1.7% -0.7%
Core: xFE & A
Germany 0.4% 0.0% 0.1% 1.9% 1.5% 0.6% 1.2%
France 0.1% 0.2% 0.2% 1.6% 0.7% 0.8% 1.4%
Italy 0.5% -0.2% 0.1% 1.5% 2.0% 1.7% 1.2%
UK 0.3% 0.0% 0.3% 2.2% 2.6% 2.7% 1.9%
Spain 0.2% 0.4% 0.4% 3.9% 2.1% 0.9% 0.5%
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