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Economy in Brief

EMU PPI Settles Down, Even if EMU Doesn't
by Robert Brusca  February 4, 2013

EMU PPI trends appear to be stabilizing on top of the target pace for the HICP. The ECB has not formal target for the PPI. But its 2.1% on muted momentum seems like something the ECB would be pleased with -even its German constituency.

Among the three major categories, capital goods, consumer goods and intermediate goods, only intermediate goods show any sign of persisting inflation.

Even that is something that is not all that worrisome since rising global oil prices could hardly be expected to by-pass any impact on intermediate goods. Still there is no evidence of those cost pressures being passed on. That will be the key.

German and French core inflation show a slight tendency for acceleration but they have even their respective three month annualized rates of inflation below 2%. Italy and UK show no clear inflation trends but their recent annualized three-month path is below 1% in each case.

We can safely conclude that the EBC's biggest problems near terms are not inflation. Still there are concerns about how what the ECB is doing now and how it will play out in the future especially when growth has picked up. But for the moment that concern is only simmering on the back burner.

Europe still has a more clear and present danger from insufficient growth. Spain's unemployment rate is still rising. While Germany and others show less downward pressure, France shows signs of an increased unraveling. The E-zone investor confidence index from Sentix rose in February but its expectations component continued to decline. Things may be 'better' but all is not well.

Europe is doing better, but based on the travails of last year (2012!) that is not saying much. The prognosis may not be for continued unraveling anymore but neither is that path completely off the table. Meandering is on the table and legacy asset problems are very much straining the table and mixed performance is still on the table and mixed performance is what gets EMU/EU/ECB/EcoFin/ETC into trouble.

Good luck with that.

Ezone and UK PPI Trends
M/M SAAR
Ezone Dec-12 Nov-12 3-mo 6-mo Yr/Yr Yr/Yr Yr Ago
Total excl. Construction -0.1% -0.1% 0.1% 3.8% 2.1% 4.3%
Capital Gds 0.0% 0.1% 0.7% 0.5% 0.9% 1.4%
Consumer Gds 0.1% 0.1% 2.3% 2.9% 2.2% 3.1%
Intermediate 0.3% 0.2% 3.0% 2.9% 1.6% 2.7%
MFG -0.1% -0.2% -0.4% 3.9% 1.6% 3.7%
Germany
  Excl. Energy 0.1% 0.2% 1.8% 1.6% 1.5% 2.1%
France
  Excl. Energy 0.1% -0.3% 0.7% 0.4% 0.4% 2.1%
Italy 0.0% -0.3% 0.3% 3.6% 1.2% 3.8%
UK 0.1% -0.2% 0.6% 3.8% 2.2% 4.8%
E-zone Harmonized PPI excl. construction
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