Empire State Index Adds To June Surge

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Retail inventories rose 0.6%, double the rise in April. General merchandise inventories halved their April rise with a 0.4% (6.6% y/y) but clothing store inventories surged 0.7% (8.1% y/y) after a 0.2% April decline. Furniture inventories fell 0.7% (-0.2% y/y) after no change during April. Auto inventories fell for the fourth straight month.

The Central Bank of the Philippines announced today that the "overall balance of payments" for June amounted to $834 million, $169 million above May and $602 million above June of last year. The overall balance of payments is defined by the Bank as equal to the change in reserve assets less the change in reserve liabilities.

Because of the identity underlying the balance of payments concept, the change in reserves is shown with its sign reversed in the balance of payments table. Thus in the Balance of Payments Table in the PHILIPPINE@EMERGEPR data base, the Change in Reserves has the opposite sign of the Overall Balance of Payments, as shown in the first chart. The Overall Balance is equal to the sum of the Current Account, the Capital and Financial Account and the Net Unclassified Items (Errors and Omissions).

The Philippines balance on current account has shown a surplus, more often than not, since mid 2001. The improvement in the current account has been due mostly to remittances from citizens working abroad. The balance on trade in goods and services continues to be negative. The second chart shows the quarterly balance on current account together with the balance on trade in goods and services and the balance on transfers (largely workers' remittances). These data are available only through the first quarter of 2007.

The chart on select core HICP readings violates the rule on how many lines to plot on a graph (sorry). But the clear message is that few of these are trending lower and most are trending up. Among those that have any trend lower, there is usually abysmally high inflation rate anyway (Greece and Spain, for example).

The table below presents the discernable detail on core inflation trends on data that were not available last week. The table shows that inflation is accelerating in too many countries for comfort. In the same table we slice the data into a number of 12-month periods ended in June since that is the most recent observation.

As of June 2007 inflation was accelerating in half of the select 12 EMU members. Over the past year inflation also was higher on a year/year basis in seven countries than it had been in June of 2004. Any way you look at the inflation comparisons there is a hint of inflation. And these data look at core prices excluding the direct effects of food and energy inflation. These four presentations, the chars and the table below, make it clear why the ECB remains wary about inflation forces.

Inflation is simply trending higher into many categories to be ignored and across too many EMU countries to assume that it will go down all by itself.