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Economy in Brief

EMU PPI Turns Sharply Higher
by Robert Brusca  February 2, 2017

The EMU area PPI surged by 1.1% in December, driving the three-month inflation rate to 10%, the six-month pace to 5.3% and raising the year-over-year pace to 1.6%. This is a sharp reversal from last year's 3% drop in the PPI.

Price trends are accelerating from 12-month to six-month to three-month for all three major categories as well: capital goods, consumer goods and intermediate goods.

The table contains an assortment of 10 EMU nations and several other European nations. Only one of them, Ireland has a drop in its PPI month-to-month in December. Inflation is accelerating over six-month to three-month as well as from 12-month to six-month in each of these nations except in Italy (where the inflation rate abates from six-month to three-month).

PPI inflation is its most virulent in the Netherlands, Greece, Sweden and Spain. Each of those nations has a high ranking for inflation compared to the others over three months and six months and each of them shows strong inflation acceleration from three-month to six-month and from 12-month to six-month.

Inflation is low in Italy, Germany, France, Ireland and Denmark. Those countries show moderate inflation over three-month, six-month and 12-month compared to other members and also a low tendency for inflation to accelerate. Some countries simply have shock absorbers than keep inflation at bay, but others have a more incendiary tendency.

In the face in this inflation pressure, the ECB has released an announcement that inflation is rising on the back of rising oil prices and that does not change the outlook at all. The ECB intends to 'look through' the rise in oil prices and to keep its ultra-easy policy as long as the prices of other goods and services remains slow. The German cry for action is falling on deaf ears. This is no longer simply analysis but is admitted ECB policy.

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