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Economy in Brief

PPI Trends in EMU
by Robert Brusca  February 2, 2012

Producer prices are moderate in December rising by 0.1% for the total index excluding construction. The headline pace has steadily lost some momentum from 4.3% Yr/Yr to 3% annualized over three months.

By sector capital goods and intermediate goods are showing a more pronounced downtrend. Producer prices for consumer goods are a little more stubborn, stuck around the 3% mark and that is of course above the 2% ceiling for the HICP that the ECB stands behind.

At the country level Germany and France show clear downward trends for Core Producer price inflation. Year-over-year each of those measures show core inflation just over 2% and three months annualized inflation is below a 0.5% annualized rate for each of them.

Italy shows aggregate producer inflation stubborn just below a 4% pace. The UK, not an EMU member, show clear downward pressure in its producer price picture as the 12-month rate is a strong 4.7% falling to a 2.8% pace over six-months and to 1.3% over three-months.

While the ECB is much more interested in HICP trends the PPI does show us how inflation is percolating at other stages of production. Producer prices are costs on the way to consumer prices or to capital equipment depending on the product. The report for December shows that there is progress being made on the inflation front and not surprising Germany and France are at the forefront of progress and Italy is not.

Some things in the grand scheme of the Euro-Area just never seem to change regardless of the stakes. Is that statement about ready to change?

Euro-Area and UK PPI Trends
Euro-Area Dec-11 Nov-11 3-Mo 6-MO Yr/Yr Y/Y Yr Ago
TotalxConstruct 0.1% 0.4% 3.0% 3.2% 4.3% 5.4%
Capital Gds 0.0% 0.1% 0.3% 0.8% 1.5% 0.7%
Consumer Gds 0.0% 0.4% 2.7% 2.1% 3.1% 1.8%
Intermediate 0.3% 0.2% 1.2% -0.2% 2.8% 6.3%
MFG 0.2% 0.6% 4.5% 3.7% 3.7% 5.2%
Gy ExEnergy 0.0% 0.4% 0.4% 0.5% 2.1% 3.6%
Fr ExF&Energy 0.1% 0.1% 0.0% 0.2% 2.3% 2.6%
Total MFG Prices
Italy 0.3% 0.5% 3.8% 3.7% 3.8% 4.8%
UK -0.2% 0.2% 1.3% 2.8% 4.7% 4.2%
Euro-Area Harmonized PPI ex construction
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