Market participants are familiar with charts showing how the manufacturing PMIs track manufacturing or industrial output, which itself tracks GDP. We have been highlighting how a divergence has opened up recently with real sector data lagging the PMI readings.
This Great Graphic from Markit shows how its measure of output prices tracks CPI. Note that the 50-reading is not the line denoting deflation conditions. That is closer to 40.
Germany's Sept CPI confirmed earlier stands at 1.4% year-over-year. In order to boost regain competitiveness, peripheral countries need to have lower inflation than Germany. Spain and Italy's figures were also released and indeed they are experiencing lower inflation than Germany. However, given the below target inflation in Germany, this is entailing risks that the disinflation (falling inflation) morphs into deflation (a decline in the general price level).
Great Graphic: German CPI and PMI Output Prices
Reviewed by Marc Chandler
on
October 11, 2013
Rating:
Reviewed by Marc Chandler
on
October 11, 2013
Rating:
