Saturday, June 11, 2011

Industrial producer prices in April, Eurozone vs USA

In my June 7 post "What are the high Industrial Producer Prices in April (EU, Eurozone) a sign of?" I noted that according to Eurostat (June 6) in April 2011 compared with April 2010, industrial producer prices gained 6.7% in Eurozone and 7.8% in the EU! With UK, +13.1% in April, having the highest hike in the EU27!

Producer prices are an indication what the retail/consumer prices will look like a few months down the line. And of course they worry economists. Yet last Thursday, both the Bank of England and the ECB chose not to raise their interest rates (yet the ECB did raise its rate 2 months ago, from 1.00% to 1.25%).

For a wider picture see my post of June 10 "While the ECB and the Bank of England kept their rates stable: ECB, BoE and Fed, 3 different central banking philosophies".

Today, I decided to have a look at what is happening on other side of the Atlantic, in the USA.

I found a table: Producer Price Index, Industrial Commodities (1982=100) in PDF format at the site of the Bureau of Labor Statistics of the US Department of Labor (US Bureau of Labor Statistics, PPI Program, last update: May 12, 2011).

I note that the index for April 2011 is 203.9 whereas the index for April 2010 was 187.0. I assume that by the operation: (203.9-187.0)/(187.0 x 100) I can get a number that I can compared with the UK, Eurozone and EU ones. That number is: +9.04%

Assuming the above assumption is correct, then the Eurozone industrial producer prices hike in April 2011 (compared with April 2010), +6.7%, is quite lower than the US one, +9.04%. That seems to imply that inflationary pressures from industrial goods at the producer stage are less strong in the Eurozone than in the USA. But I am not an expert in those things.

But remember, the USD (Fed) rate is 0 to 0.25% and the Euro (ECB) one 1.25%. And that the Fed, like the Bank of England, and unlike the ECB, has to raised its rate for a long time!

By the way, the US April inflation year-on-year was 3.2% (see: Reuters, May 14) whereas the April one in the Eurozone was 2.8% and the flash estimate of the Eurostat for May is 2.7%. The 3.2% US inflation is the highest since October 2008.

The US GDP: Compared with the first quarter of 2010, US GDP in the 1st quarter of 2011 grew by 2.3% in the United States (source: Eurostat) while in the Eurozone and the EU it was 2.5%.

This is all, for now.
What do you make of all the above?

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