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Friday, September 04, 2009

ECRI International FIG Summary - Expectations for Future Inflation

The Economic Cycle Research Institute, ECRI - a New York-based independent forecasting group, in a series of five press releases last night, updated their outlook for international inflation. (More about ECRI). Below is a summary of ECRI's international Future Inflation Gauges (FIG) for July 2009.

Eurozone (Germany, France, Italy & Spain)
EUROZONE FUTURE INFLATION GAUGE SLIPS
  • ECRI’s Eurozone Future Inflation Gauge (EZFIG) edged down in July. The value of the EZFIG lies in its ability to predict cyclical turns in Eurozone inflation.
  • The EZFIG eased to 84.6 (1992=100) in July from 85.0 in June, though its smoothed annualized growth rate rose to -16.7% from -19.1%. The EZFIG was pulled down mainly by declining inflationary pressures in Germany.
  • Its latest dip notwithstanding, the EZFIG has begun to stabilize, after plummeting to an all-time low in March. If this pattern persists, consumer price deflation in the Eurozone may become less of a threat.
FRENCH INFLATION PRESSURES REMAIN SUBDUED
  • ECRI's French Future Inflation Gauge (FFIG) rose slightly in July. The value of the FFIG lies in its ability to anticipate cyclical swings in the French inflation rate.
  • The FFIG ticked up to 98.4 (1992=100) in July from 98.3 in June, as its smoothed growth rate rose to -3.1% from -4.0%. The gauge was boosted mainly by an inflationary move in a measure of raw materials prices.
  • As forecast by the earlier plunge in the FFIG, French inflation plummeted drastically starting last summer, and subsequently slid into negative territory. With the FFIG remaining near June’s record low, French consumer price deflation is likely to persist for the time being.
GERMAN FUTURE INFLATION GAUGE FALLS
  • ECRI's German Future Inflation Gauge (GFIG) decreased in July. The value of the GFIG lies in its ability to anticipate cyclical turning points in the German inflation rate.
  • The GFIG declined to 72.1 (1992=100) in July from 73.8 in June, though its smoothed growth rate inched up to -33.4% from -35.2%. The gauge was pulled down mainly by a negative contribution from a measure of loans.
  • As correctly forecast by the earlier plunge in the GFIG, German inflation remains far below its earlier highs. With the GFIG nearing a seven-and-a-half-year low, German consumer prices are likely to remain restrained.
ITALIAN FUTURE INFLATION GAUGE EDGES UP
  • ECRI’s Italian Future Inflation Gauge (IFIG) ticked up in July. The value of the IFIG lies in its ability to anticipate cyclical turning points in the Italian inflation rate.
  • The IFIG rose marginally to 95.1 (1992=100) in July from 95.0 in June, as its smoothed annualized growth rate rose to -4.9% from -6.2%, mainly due to a positive contribution from a measure of supplier deliveries.
  • As anticipated by the earlier plunge in the IFIG, Italian inflation has fallen sharply since mid-2008. However, the IFIG has been creeping up in recent months, indicating that there is little deflation danger in Italy.

SPANISH FUTURE INFLATION GAUGE RISES
  • ECRI’s Spanish Future Inflation Gauge (ESFIG) increased in July. The value of the ESFIG lies in its ability to anticipate cyclical turning points in the Spanish inflation rate.
  • The ESFIG rose to 74.7 (1992=100) in July from 72.6 in June, as its growth rate jumped to -13.0% from -23.1%. The gauge was pushed up mainly by a positive contribution from a measure of producer prices.
  • As predicted by the earlier upturn in the ESFIG, Spanish consumer prices have begun to pick up from their earlier lows. With the ESFIG further distancing itself from its record lows, Spanish inflation is likely to rise further in the months ahead.
United Kingdom: RESTRAINED U.K. INFLATION PRESSURES
  • ECRI's United Kingdom Future Inflation Gauge (UKFIG) inched up in July. The value of the UKFIG lies in its ability to anticipate cyclical swings in U.K. inflation.
  • The UKFIG ticked up to 98.7 (1992=100) in July from 98.6 in June, as its smoothed annualized growth rate rose to -7.0% from -9.4%. The gauge was pushed up mainly by an inflationary move in a measure of vendor performance.
  • The UKFIG rose marginally from June’s record low in its latest reading. Thus, inflation pressures in the U.K. economy remain subdued.
Japan: JAPANESE FUTURE INFLATION GAUGE DIPS AGAIN
  • ECRI’s Japanese Future Inflation Gauge (JFIG) continues to decline. The value of the JFIG lies in its ability to anticipate cyclical swings in Japanese inflation.
  • The JFIG slipped to 96.4 (1992=100) in July from 96.5 in June, though its smoothed annualized growth rate ticked up to -2.1% from -2.3%, mainly due to a negative contribution from a measure of joblessness.
  • Japanese inflation plummeted in the second half of 2008, and consumer prices have been easing for the past year, as anticipated by the earlier plunge in the JFIG. With the JFIG slipping further in July to a new record low, deflationary pressures are still mounting.
Korea: KOREAN FUTURE INFLATION GAUGE TICKS UP
  • Korean inflationary pressures rose a bit further in July, according to ECRI's Korean Future Inflation Gauge (KFIG). The value of the KFIG lies in its ability to anticipate cyclical swings in the Korean inflation rate.
  • The KFIG inched up to 97.4 (1992=100) in July from 97.1 in June, as its smoothed annualized growth rate jumped to 0.3% from -1.1%, mainly due to an inflationary move in a measure of joblessness.
  • Korean inflation has risen marginally in recent months, as predicted by the earlier cyclical upturn in the KFIG. With the KFIG rising further in July to a nine-month high, Korean inflationary pressures are clearly edging up.
Canada: CANADIAN FUTURE INFLATION GAUGE INCHES UP
  • ECRI’s Canadian Future Inflation Gauge (CFIG) ticked up in July. The value of the CFIG lies in its ability to anticipate cyclical turning points in the Canadian inflation rate.
  • The CFIG increased to 95.1 (1992=100) in July from 94.7 in June, as did its smoothed annualized growth rate to -3.3% from -5.4%, mainly due to a positive contribution from a measure of commodity prices.
  • Canadian inflation slipped in its latest reading, but remains close to June’s seven-month high, as anticipated by the earlier upturn in the CFIG. Meanwhile, the CFIG has risen in a somewhat pervasive and persistent pattern since last spring, indicating that Canadian inflation pressures are creeping up.
Commenting on the data, Lakshman Achuthan, managing director at ECRI said
  • "Despite the widespread optimism about Eurozone growth, underlying inflationary pressures are essentially non-existent.

  • "The UKFIG rose marginally from June’s record low in its latest reading. Thus, inflation pressures in the U.K. economy remain subdued."
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