BusinessUSA

Some timid signs of slowing inflation in Europe


The proof is in the data these days and while consumer price inflation remains high, there are tentative signs that inflationary pressures are starting to subside in Europe – at least for now. Let’s take a direct look at recent economic releases.

French PMI index

“Inflation rates for input costs and product prices were at their lowest in nine months, although they are still high by historical standards.

The easing of cost pressures in the manufacturing sector was particularly notable, with the respective index falling seven points to its lowest level in nearly two years. Some companies mentioned lower prices for certain raw materials such as wood and metals.

Prices for French goods and services continued to rise sharply, but to the lowest extent since August. Although many companies continued to pass on higher operating costs to their selling prices, companies that experienced cost reductions took the opportunity to lower their costs.

PMI Germany

“Inflationary pressures in the German private sector economy remained historically high amid the final quarter of the year. That said, there were further signs of easing pressures on pipeline prices, with companies having reported the smallest increase in input costs since May 2021. The slowdown was led by the manufacturing sector, where the rate of input price inflation fell sharply to a 23-month low. Service sector cost inflation remained among the fastest on record, partly due to the rise in previous months to the lowest since August.

As businesses continue to pass on rising costs to customers, November saw another sharp rise in average prices charged for goods and services. The rate of producer price inflation has slowed and was the second slowest in the past nine months, although it was still faster than at any time in the series’ history before that ( dating back to September 2002).”

Germany PPI

“Compared to September 2022, producer prices decreased by 4.2% in October 2022. This is the first month-on-month decline since May 2020 (–0.4% compared to April 2020). Compared to September 2022, energy prices have fallen by an average of 10.4%. %, mainly caused by lower electricity and natural gas prices (distribution).”

Eurozone PMI

“Business costs rose at the slowest pace in 14 months, in turn allowing retail price inflation to moderate, although inflation rates remain high.

Average input prices paid by manufacturers rose at a markedly reduced pace due to (an improving supply situation), posting the smallest monthly gain since December 2020. service sector also moderated, falling to the second lowest in nine years. month. Measured across both sectors, input cost inflation fell to its lowest level since September 2021, while remaining high by historical standards, driven mainly by high energy costs.

Average prices charged for goods and services also rose at a reduced pace, while also continuing to climb sharply, with the rate of inflation slowing for a second consecutive month to register the smallest increase since August. Selling price inflation rates eased in both manufacturing and services, notably reaching a 20-month low in the former.

Even today we see Spanish industrial awards to be up 26.1% year-on-year – its slowest pace since September 2021.

The TLDR The message here is that we are starting to see inflationary pressures cool at a marked pace in Europe, driven primarily by lower energy prices. That said, headline inflation remains very high and that’s also thanks to energy prices – which are still high by historical standards despite the recent drop.

Moreover, increasing cost pressures are spilling over to broader sectors and this could still keep inflation – more specifically core inflation – high next year.

So, while there is some hopeful optimism, it is still too early to say that this the turning on the inflation

Inflation

Inflation is defined as a quantitative measure of the rate at which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general price level where a given currency is effectively buying less than it has in previous periods. In terms of valuation of strength or currencies, and by extension foreign currencies, inflation or its measures are extremely influential. Inflation stems from the global creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply relative to the wealth produced (measured with GDP). This thus generates demand pressure on a supply that is not increasing at the same rate. The consumer price index then increases, generating inflation. How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare the different purchasing power of each country based on the general level of prices. By doing so, it helps to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates in the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on the exchange. Conversely, too low inflation (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the foreign exchange market.

Inflation is defined as a quantitative measure of the rate at which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general price level where a given currency is effectively buying less than it has in previous periods. In terms of valuation of strength or currencies, and by extension foreign currencies, inflation or its measures are extremely influential. Inflation stems from the global creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply relative to the wealth produced (measured with GDP). This thus generates demand pressure on a supply that is not increasing at the same rate. The consumer price index then increases, generating inflation. How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare the different purchasing power of each country based on the general level of prices. By doing so, it helps to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates in the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on the exchange. Conversely, too low inflation (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the foreign exchange market.
Read this term battle for now.

cnbctv18-forexlive

Not all news on the site expresses the point of view of the site, but we transmit this news automatically and translate it through programmatic technology on the site and not from a human editor.
Back to top button