Economy in Brief

The INSEE industry climate index settled lower in March at 95.9, down from 97.0 in February. The index is lower than its year-ago value of 102.1 and since 2001 it has been this low or lower only 7.5% of the time. Despite the sense of some stability in manufacturing in the tabular data for the last year, the chart (of data since 2014) and the table’s own presentation of the queue standing reveals manufacturing to be at a relative weak standing in March.

Manufacturing production expectations have a 34.4 percentile standing but did improve slightly from the February reading of -14.8. The recent trend of production weakens on the month to a lower quartile standing at its 23.7 percentile. The personal likely trend, which is the reading for each respondent gives to the prospects for his own industry, ticked higher in March to a 40.5 percentile standing. That is better than the percentile for industry over all but still below the level that marks the historic median – a standing at the 50th percentile.

Orders and demand as well as foreign orders and demand each weakened. They each have standing at or below their respective 20th percentile around the lower one-fifth of all historic readings. In addition, the March reading for orders and demand are substantially weaker than they were a year ago and the slippage has been worse for foreign orders.

In contrast, inventory level show few changes and are similar to their year-ago readings and close to their historic median.

Prices have moved to lower readings in recent months. However, price trends and level readings are higher than they were a year ago. In terms of rankings, the own likely price trend is at a 61.5 percentile standing, above its historic median while the manufacturing price level has a relatively weak 36.1 percentile standing.

German PPI inflation fell by 0.2% in February for the headline series, ‘PPI excluding construction.’ The drop marks a string of declines in German headline PPI inflation. For the PPI excluding energy, inflation rose by 0.1% in February after a 0.1% rise in January and no change in December. This is a clear winning streak for German inflation trends at the producer level.

Inflation results from 12-months to 6-months to 3-months show German headline PPI inflation decelerating steadily and somewhat aggressively from an increase of 0.8% over 12 months to a -0.6% annual rate over six months to a -2.5% annual rate over three months. For the PPI excluding energy, German inflation is up 1.5% over 12 months, which eases to a 0.5% annual rate over six months, and then stabilizes but accelerates slightly at a 0.7% annual rate over three months. The performance and behavior of headline inflation obviously shows a great deal more weakness than in the PPI excluding energy. But both are well-behaved.

Oil price trends Brent oil prices declined by 10% over the previous year and have declined by 8% over the most recent 12 months. Over six months they're falling at a 9% annual rate, but then over the last three months they've been increasing at a 9.5% annual rate. Monthly Brent oil prices fell slightly in December, fell by 3.8% in February, but rose by 6.5% in between, during the month of January. The oscillation in oil prices makes it just a little bit difficult to nail down the impact of oil prices on the inflation numbers, but generally oil has been weak and there has only been a slight amount of pressure from oil recently compared to past trends.

German PPI component trends German PPI components are not seasonally adjusted; they generally show inflation is relatively stable. For consumer prices, the 12-month, 6-month and 3-month pace is just under 3%. For investment goods, inflation is accelerating slightly from 2% over 12 months to a 4.2% annual rate over three months. Intermediate goods display growth rates for inflation that fluctuate between -0.9% at an annual rate over six months to +1.4% at an annual rate over three months. The PPI trends compare to CPI trends that are really quite flat with the headline CPI between 2.5 and 2.2% at an annual rate across horizons and the CPI excluding energy at a pace of expansion between 2.4% and 2.7%.

All-in-all German inflation appears to be contained and at a relatively low level. This should be a report that the European Central Bank is pleased with.