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Economy in Brief

PPI Prices Climb Sharply in EMU
by Robert Brusca  March 2, 2011

The PPI in the Euro Area is up to 6.1% Yr/Yr and still accelerating. Over 6-mos the pace is 8.5%and over 3-Mo the paces is 12.3%. Most of the damage is being done in the intermediate goods sectors where commodity prices, especially oil have the largest impact.

Still core price inflation is accelerating across the Zone and in Europe, in Germany, and in France also in the UK, an EU member country.

There are also minor increases in inflation for capital goods and consumer goods. For consumer goods inflation has edged up from 2% Yr/Yr to 3% over 6-mos and to 3.5% over 3-mos. For capital goods the move up is less steady but the 12-month pace of inflation in that sector is 0.9% compared to 1.1% over three months.

On balance this is the producer prices index and not the more important CPI (HICP). Still the acceleration in intermediate goods prices will give the ECB pause. While producer prices do not map neatly into consumer prices when the pressure gets to be this intense the central bank will take notice. The ECB has been flashing hot and cold over the need to fight inflation. Its last take seemed to be that the need to hike rates was not so great. But now with the Middle East conflict broken out and oil prices making another push that stance could be set to change. The pressures at the producer price level are intense and they may be spreading beyond intermediate goods alone.

Euro Area and UK PPI Trends
  M/M SAAR
Euro Area Jan-11 Dec-10 3-Mo 6-MO Yr/Yr Y/Y Yr Ago
TotalxConstruct 1.3% 1.1% 12.3% 8.5% 6.1% -1.0%
Capital Gds 0.2% -0.1% 1.1% 0.7% 0.9% -0.6%
Consurmer Gds 0.2% 0.4% 3.5% 3.0% 2.0% -0.7%
Intermediate 1.4% 1.0% 13.8% 9.6% 7.4% -1.5%
MFG 1.0% 1.2% 13.4% 9.4% 5.6% 0.9%
Germany
   Gy ExEnergy 0.7% 0.5% 6.5% 4.6% 4.1% -1.1%
France:Tot
   Fr ExF&Energy 0.8% 0.1% 6.5% 4.0% 3.0% -0.9%
UK 1.0% 0.5% 8.3% 6.7% 4.8% 3.5%
Euro Area Harmonized PPI ex construction
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