Industrial producer prices on free fall and stagnant output

BusinessEurope Day on the occasion of the publication of the Blueprint for Industrial Competitiveness entitled "Industry matters: Recommendations for an industrial compact". Michael Rake, Chairman of BT Group plc and President of the Confederation of British Industry (CBI), Ingo Kramer, President of the Confederation of German Employers’ Associations (BDA), Pierre Gattaz, Chairman of the Executive Board and President of the Executive and Strategic Committee of Radiall, President of the Movement of French enterprises (Medef), and Antonio Tajani, Vice-President of the European Commission in charge of Industry and Entrepreneurship (from right to left). (EC Audiovisual Services, 28/01/2014).

BusinessEurope Day on the occasion of the publication of the Blueprint for Industrial Competitiveness entitled “Industry matters: Recommendations for an industrial compact”. Michael Rake, Chairman of BT Group plc and President of the Confederation of British Industry (CBI), Ingo Kramer, President of the Confederation of German Employers’ Associations (BDA), Pierre Gattaz, Chairman of the Executive Board and President of the Executive and Strategic Committee of Radiall, President of the Movement of French enterprises (Medef), and Antonio Tajani, Vice-President of the European Commission in charge of Industry and Entrepreneurship (from right to left). (EC Audiovisual Services, 28/01/2014).

 

During the last few days, Eurostat, the EU statistical service, has produced disappointing data on the Eurozone economy. Last week it was a fall of the volume of retail sales in December by 1.6%, compared to November. Also in December last year compared with December 2012 the retail sales index decreased by 1% in the euro area. Yesterday the statistical service announced that industrial production fell by 0.7% in euro area during December in relation to November 2013. According to the same source, average industrial production for the year 2013, compared with 2012, dropped by 0.8% in the euro area and by 0.5% in the EU28.

Austerity and falling prices

Even more discouraging was the announcement that in December 2013, compared with December 2012, industrial producer prices decreased by 0.8% in the euro area and by 0.6% in the EU28. The thing is that industrial producer prices are a strong indication of core inflation developments. This is an indication that nobody referred to while discussing the disinflation issue in the Eurozone. There is a lot of talk lately going around about the falling inflation (disinflation) in the euro area. The International Monetary Fund recently warned European decision makers about the possibility of Europe’s economy entering a vicious cycle of austerity and falling prices that is negative inflation (deflation).

The issue has acquired global political dimensions with the US and the IMF openly and loudly blaming Germany, for imposing on itself and the Eurozone an unneeded austerity policy, which may prove detrimental even to the world economy. The Americans argue that the surplus European economies like Germany and others should increase their internal demand, by applying appropriate anti-austerity policies. In this way Germany is to help itself and fellow Eurozone countries in dire straits, to raise growth gear. By the same token Europe will help the entire world grow at a higher tempo. Otherwise Europe may end up in the dangerous negative part of the inflation diagram. Not to forget that negative inflation is associated with the worst real economy crisis of the last hundred years, from 1914 onwards.

Industrial prices on a free fall

Coming back to industrial producer prices, Eurostat observed that the “average industrial producer prices for the year 2013, compared with 2012, dropped by 0.2% in the euro area”. In December 2013, compared with December 2012, prices in total industry, excluding construction and the energy sector, fell by 0.3% in the euro area and by 0.1% in the EU28. Prices in the energy sector decreased by 2% and 1.5% respectively. Intermediate goods dropped by 1.7% in the euro area and by 1.5% in the EU28. Industrial producer prices (total industry) in the Eurozone, on a yearly basis, keep falling continuously after August 2013 (August -0.9%, September -0.9%, October -1.3%, November -1.2%, December -0.8%).

Let’s suppose that energy industrial goods do not represent home economic structures, because their prices are closely related to the relevant international market. According to the data of the previous paragraph this leaves us with the falling prices in ‘total industry’ and the ‘intermediate goods’. Still overall inflation rate in January was in positive grounds at 0.7%. This fact offered to Mario Draghi, President of the European Central Bank, the opportunity to dismiss the fears of deflation hitting the Eurozone. However, the ECB’s mandate states clearly that the central bank should take measures, if inflation is persistently diverging from the set target, which is 2%.

Deflation fears

Monotonously all ECB dignitaries recite that the inflation target is below but near 2%. Only yesterday the ECB cut down its inflation estimate for 2014 to 1.1%. Obviously, this is not close to 2% but Berlin doesn’t let the central bank do anything about it, like helping the south to grow again. Incidentally, inflation in Greece reached even -3.5% on a yearly basis. But Germany doesn’t care if half the Eurozone is practically in a deflation trap, as long as the Teutonic psychological deficiencies related to imaginary inflation fears, are taken good care of by the ECB.

The problem is, though, that when disinflation is to reach Germany, the situation may be irreversible, because nobody can tell what the reaction of the capital markets may be with the slightest negative indication.

 

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

St. Vincent and the Grenadines breaks a record, as smallest ever Security Council seat holder

New round of bargaining for the 2014 EU budget late in autumn

Trump badly cornered at home by agribusiness and steel consumer lobbies: Trade

From UN Assembly podium, Central African Republic leader appeals for lifting arms embargo

Infinite Oath

Guterres calls for ‘maximum restraint’ following drone assault on key Saudi oil facility

JADE at European Business Summit 2015

One-sixth of the world’s economy has now pledged to cut CO2 to zero by 2050

Monday’s Daily Brief: Independent UN experts on Myanmar, UN chief renounces attacks in US, Libyan airport violence, UN spokesperson on Kashmir, and FAO and Italy on development

UN ready to rise above political fray and help Venezuelans based ‘on need, and need alone’

New Erasmus: more opportunities for disadvantaged youth

Subsidiarity and Proportionality: Task Force presents recommendations on a new way of working to President Juncker

Cybersecurity should be a source of hope, not fear. Here are 5 reasons why

Health equity and accessibility for migrants is a peremptory demand

Vaccinations and the movement of anti-vaccers

It’s people, not technology, that will decide the future of work

Fake news: What it is, and how to spot it

Eurostat: Real unemployment double than the official rate

Groundbreaking cancer-fighting drugs now included in updated UN list of essential medicines

African Peace Facility: African Union Peace & Security Operations boosted by an additional €800 million from the European Union

The US may be “open” to reviving TTIP, while the EU designs the future of trade with China

Oslo leads the way in ‘Breathe Life’ campaign for cleaner cities in climate change era

Guterres underlines climate action urgency, as UN weather agency confirms record global warming

Everybody against Germany over the expensive euro

COP21 Breaking News_03 December: Unprecedented Global Alliance for Buildings and Construction to Combat Climate Change

A machine din

‘Comprehensively include migrants’ or sustainable development won’t happen, warns General Assembly President

We must build resilience to face the future – but will we be fast enough?

October’s EU strong digital mix: From Safe Harbour to Net Neutrality, Roaming and Snowden

The four top Americans who flew to Europe perplexed things about Trump’s intentions

Deal on tightening the rules to stop terrorists from using homemade explosives

Arlington, USA: kick-off of the fifth round of the EU-US boxing match

Governments adopt UN global migration pact to help ‘prevent suffering and chaos’

Extra mild ECB tapering of QE and zero interest rates keep euro low

4 ways the US can take the lead in the fight against human trafficking

No better year for the EU’s weak chain links

CLIMATE CHANGE FOCUS: Cows, coffee and sustainable farming

An open letter from business to world leaders: “Be ambitious, and together we can address climate change”

Electronic or conventional cigarettes – which is safer?

EU budget: Reinforcing Europe’s cultural and creative sectors

What business leaders can learn from jazz

UN boosts humanitarian appeal to help tackle Zimbabwe’s ‘worst-ever’ hunger crisis

China is among the 20 most innovative economies for the first time

‘Global sisterhood’ tells perpetrators ‘time is up’ for pandemic of violence

One person dies by suicide every 40 seconds: new UN health agency report

AI-driven companies need to be more diverse. Here’s why

A call for a new crop of innovators

EU leaders agree on 2030 Climate and Energy Package: is “flexible” brave enough?

This is why people live, work and stay in a growing city

Gas pipeline in the European Union. (Copyright: EU, 2012 / Source: EC - Audiovisual Service / Photo: Ferenc Isza)

EU Investment Bank approves € 1.5bn loan for Trans Adriatic Pipeline (TAP)

Nitrate pollution of water sources: new impulses for EU Water Policy?

A quarter of Pacific islanders live below ‘basic needs poverty lines’, top UN development forum hears

It’s EU vs. Google for real: the time is now, the case is open

IMF launches a new offensive against Germany

Why the financial scandals multiply?

6 ways least developed countries can participate in the 4IR

Fisherwomen of Lake Chad show optimism in face of multiple challenges

On our way to China

Cheese energy could power hundreds of UK homes

EU: Huge surplus in the trade of services with the rest of the world

More Stings?

Comments

  1. Undeniably imagine that which you said. Your favorite justification appeared
    to be at the web the simplest thing to consider of.
    I say to you, I definitely get irked while other folks think about concerns that they just don’t know about.
    You controlled to hit the nail upon the top and also defined out
    the entire thing with no need side effect , other folks can take a signal.
    Will probably be again to get more. Thanks

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s