July CPI: -5.9%

Économiste Monétaire

Main CPI release; Sub-Indices.





A quick reminder of the COICOP Groups:
01 Food and Non-Alcoholic Beverages;
02 Alcoholic Beverages and Tobacco;
03 Clothing and Footwear;
04 Housing, Water, Electricity, Gas and Other Fuels;
05 Furnishings, Household Equipment and Routine Household Maintenance;
06 Health;
07 Transport;
08 Communications;
09 Recreation and Culture;
10 Education;
11 Restaurants and Hotels; and
12 Miscellaneous Goods and Services.

Anonymous1987

Increases in Health and Education are worrying otherwise a positive sign for the cost of living. However the increase in misc goods and services seems a bit puzzling. It doesn't seem it can put down to sticky prices in services because its actually rising, any ideas?

silverharp

off topic a bit , but the GDP increases in France & Germany , they werent positive because of a drop in imports?

daveirl

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Économiste Monétaire

Anonymous1987 wrote: »

Increases in Health and Education are worrying otherwise a positive sign for the cost of living. However the increase in misc goods and services seems a bit puzzling. It doesn't seem it can put down to sticky prices in services because its actually rising, any ideas?

Health insurance is accounted for in Group 12 rather than Group 06, and that's up 21% y-o-y. This explains some of the +4.6% number.

silverharp wrote: »

off topic a bit , but the GDP increases in France & Germany , they werent positive because of a drop in imports?

http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20090813

"French GDP increased by +0.3%* in the second quarter of 2009, after four quarters of contraction. Its overhang for 2009 is then -2.4%.

"This bounce is partly due to the narrowing of the foreign trade balance this quarter: exports grew +1.0% (after -7.1% in Q1) while imports decreased at a milder pace than in the last quarter (-2.3% after -5.8%), and foreign trade contributed +0.9 points to GDP growth. Households consumption went up by +0.4% (after +0.1% in Q1) and total GFCF’s decline softened (-1.0% after -2.6%). Production edged up in the second quarter (+0.5% after -1.9%). Finally, inventory changes contributed negatively this quarter again (-0.6 points after -0.7 points in Q1)."

daveirl wrote: »

That CPI number is horiffic. Not what an indebted economy wants. Still can't figure out where people get this hyper inflation idea from when all the data we get is deflationary.

That argument seems to emanate from persons with a very simple view of monetary economics—the idea that supply is everything. The ECB/Eurosystem could pack reserves of €1trn into Irish banks and, if they can't find any willing borrowers, it wouldn't make a modicum of difference for inflation.

Hasschu

It is easy to see which sectors are monopoly/oligopoly/highly regulated. Misc. is the only one I find puzzling.

silverharp

Économiste Monétaire wrote: »

"French GDP increased by +0.3%* in the second quarter of 2009, after four quarters of contraction. Its overhang for 2009 is then -2.4%.

"This bounce is partly due to the narrowing of the foreign trade balance this quarter: exports grew +1.0% (after -7.1% in Q1) while imports decreased at a milder pace than in the last quarter (-2.3% after -5.8%), and foreign trade contributed +0.9 points to GDP growth. Households consumption went up by +0.4% (after +0.1% in Q1) and total GFCF’s decline softened (-1.0% after -2.6%). Production edged up in the second quarter (+0.5% after -1.9%). Finally, inventory changes contributed negatively this quarter again (-0.6 points after -0.7 points in Q1)."

Cheers, so because the French imported less their GDP went up , green shoots or clutching at straws?

Économiste Monétaire wrote: »

That argument seems to emanate from persons with a very simple view of monetary economics—the idea that supply is everything. The ECB/Eurosystem could pack reserves of €1trn into Irish banks and, if they can't find any willing borrowers, it wouldn't make a modicum of difference for inflation.

Also mark all the bank assets to market and I think you'd feel quite deflated

Anonymous1987

daveirl wrote: »

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CPI -5.9%, CPIX-2%, the difference = mortgage holders struggling

To be fair judging by monetary policy the UK is probably most at risk for hyperinflation followed closely by the US while the ECB would not seem to be as exposed, through into the fact that oil has already reached $70 a barrel pre-recovery and it would seem to make the case for high inflation in the future probably not hyper-inflation though.

Économiste Monétaire

silverharp wrote: »

Cheers, so because the French imported less their GDP went up , green shoots or clutching at straws?

That's a pretty big factor. Their consumption numbers are holding up, though. The picture would be improved by a positive GFCF figure. The German number is slightly more puzzling, they haven't released general government expenditure numbers, yet. Here's the German press release:

http://www.destatis.de/jetspeed/portal/cms/Sites/destatis/Internet/EN/press/pr/2009/08/PE09__298__811,templateId=renderPrint.psml



Also, the MUICP numbers were released today: -0.7%. Here's a graph summarising the situation of our Euro Area comrades (the numbers are the HICP for each country):

Digi_Tilmitt

daveirl wrote: »

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Deflation is helping put food on the table for all the people who've lost their jobs or have come on hard times. My family's income has fallen through the floor, but falling prices are helping us cope.

Of course for all the people who got themselves into debt during the bubble, it may be a different story, though I can't see how them paying more for groceries would help them pay off their mortgages. I suppose you could argue that unreasonably high prices would support unreasonably high wages which would help the debt junkies pay off what they borrowed.

But for the people with no debt, deflation is really enhancing their standard of living.

1huge1

Its dissapointing to see Group 02 Alcoholic Beverages and Tobacco has risen by such an ammount, fair enough the government can tax as much as they want from tobacco (maybe extra tax revenue from legalising Cannabis but thats a different story) but they didn't raise tax on Alcoholic Beverages and its just annoying to see how so many publicans deal with the loss of customers by rising the prices.

Hopefully now with the end of the price freeze we can finally see a drop in the price of a pint.

Digi_Tilmitt wrote: »

But for the people with no debt, deflation is really enhancing their standard of living.

I'm sure it evens out due to the new taxes etc being introduced/risen

noodler

I am one of those who feels Cannabis is a special case. I fear the effects if would have on individual/nationwide productivity if it were legalised.

FridaysWell

Hmm that CPI figure was interesting, I thought it would get down there awhile back. A bit of deflation is what this country needs! Get people spending, get cash going. Cost to do anything here is too high, business wise. Need to attract manufacturers back and deflation and recession could bring 'em back if costs go down and people work for a little less. Education rising worries me though. . . I'm scared. . .

Économiste Monétaire

1huge1 wrote: »

Its dissapointing to see Group 02 Alcoholic Beverages and Tobacco has risen by such an ammount, fair enough the government can tax as much as they want from tobacco (maybe extra tax revenue from legalising Cannabis but thats a different story) but they didn't raise tax on Alcoholic Beverages and its just annoying to see how so many publicans deal with the loss of customers by rising the prices.

Hopefully now with the end of the price freeze we can finally see a drop in the price of a pint.


I'm sure it evens out due to the new taxes etc being introduced/risen

Group 02 is positive across the EA (y-o-y). It could be worse, you could live in Iceland with an increase of 36% in group 02