Global| Oct 04 2011EMU PPI Tails Off...Except for Capital Goods
Summary
Inflation in Euro-Area PPI prices is starting to settle down- and just in time. With its Greek tragedy playing out (well, it isn’t a comedy is it?), the ECB could well use a few more degrees of freedom in its policy options. While the [...]
Inflation in Euro-Area PPI prices is starting to settle down- and just in time. With its Greek tragedy
playing out (well, it isn’t a comedy is it?), the ECB could well use a few more degrees of freedom in
its policy options. While the ECB may continue to be under heavy pressure for its role in the Greek
bailout and European stability program it would be good if one of the criticisms were not that the
ECB was doing all of this while inflation overshot its mark.
There is no confusion about inflation. The ECB inflation ceiling is expressed in terms of the headline HICP rate. But seeing some calmer results in the PPI could be beneficial and may simply be another sign that overall inflation pressures are abating. The PPI generally is more volatile than the HICP so if the PPI sinks below the HICP in terms of its rate of change that is a good- if tentative- sign that the pressures on the HICP are probably abating as well.
The PPI is slowing, intermediate price pressures have peaked and consumer prices are decelerating. Only capital goods prices still seem to have some acceleration left in them. And, capital goods prices are only up by 1.6% Yr/Yr and at a 2.6% annual rate over the recent three-months when they have ‘accelerated.’ The broader Yr/Yr trends echo these same results in EMU.
With world commodity prices slipping the inflation pulse seems to on its way to becoming unwound. At the Federal Reserve in the United States there is already some bracing for a possible risk of deflation on its way as commodity prices fall and as economic growth slows…again. In Europe those concerns do not seem to shift quite so quickly but it does look like the underlying economic paradigm has shifted.
| Euro-Area and UK PPI Trends | ||||||
|---|---|---|---|---|---|---|
| M/M | SAAR | |||||
| Euro-Area | Aug-11 | Jul-11 | 3Mo | 6Mo | Yr/Yr | Y/Y Yr Ago |
| TotalxConstruct | 0.0% | 0.4% | 0.2% | 2.1% | 5.9% | 3.6% |
| Capital Gds | 0.1% | 0.2% | 2.6% | 1.7% | 1.6% | 0.7% |
| Consumer Gds | 0.1% | 0.0% | 0.7% | 2.9% | 3.3% | 0.5% |
| Intermediate | -0.2% | -0.1% | -2.0% | 0.7% | 5.7% | 4.7% |
| MFG | -0.2% | 0.4% | -0.5% | 0.5% | 5.5% | 3.3% |
| Germany | ||||||
| Gy ExEnergy | -0.1% | 0.2% | 0.7% | 1.3% | 3.3% | 2.5% |
| France:Tot | ||||||
| Fr ExF&Energy | 0.2% | -0.1% | 0.7% | 1.8% | 3.4% | 1.9% |
| Total MFG Prices | ||||||
| Italy | -0.1% | 0.4% | 0.7% | 0.3% | 5.4% | 3.6% |
| UK | 0.3% | 0.5% | 3.9% | 4.6% | 6.1% | 4.3% |
| Euro-Area Harmonized PPI ex construction | ||||||
Robert Brusca
AuthorMore in Author Profile »Robert A. Brusca is Chief Economist of Fact and Opinion Economics, a consulting firm he founded in Manhattan. He has been an economist on Wall Street for over 25 years. He has visited central banking and large institutional clients in over 30 countries in his career as an economist. Mr. Brusca was a Divisional Research Chief at the Federal Reserve Bank of NY (Chief of the International Financial markets Division), a Fed Watcher at Irving Trust and Chief Economist at Nikko Securities International. He is widely quoted and appears in various media. Mr. Brusca holds an MA and Ph.D. in economics from Michigan State University and a BA in Economics from the University of Michigan. His research pursues his strong interests in non aligned policy economics as well as international economics. FAO Economics’ research targets investors to assist them in making better investment decisions in stocks, bonds and in a variety of international assets. The company does not manage money and has no conflicts in giving economic advice.
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