Times of economic transition are often the hardest periods to interpret as they exhibit mixed tendencies. So it was last week that we published here almost contradictory comments about CPI inflation in various countries. In some places, it remains quiescent, while elsewhere, it is picking up noticeably. So one can't generalize about the present evolution of price trends

Today brought PPI data for Germany and Switzerland for June. In these countries as well as the US, producer prices have firmed. But the inflationary potential in these figures varies widely. German and Swiss manufactured goods prices are rising, but they remain on modest uptrends: 1.5% year-on-year in Germany and 1.4% in Switzerland. But in Germany this pace is actually a bit slower than what prevailed at the end of 2003. Energy accounts for that, as those prices have moderated considerably in Germany since late last year. Excluding energy, German factory goods prices are also on a firming trend, although they were up just a modest 1.3% in June from a year earlier. Swiss producer prices look to be picking up across many categories, but all at a very modest pace.

US factory prices are on a rampage by comparison, gaining at a 4%-5% pace through June, year-on-year, measured as total manufacturing industry prices or total finished goods prices. Energy accounts for a notable portion of the advance in finished goods, as seen in the table below, but even removing it, we are still left with 3% year-on-year in recent months. And food appears to explain a good bit of that. Other price moves show wide variation. So, even though the total US PPI is showing some strength in the aggregate, it is quite uneven among sectors, so that the overall inflation potential in these wholesale prices is far from clear. Moreover, as the accompanying chart shows, there is virtually no correlation of producer prices excluding energy in Germany and the US.