A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.



Eurozone Inflation Pressures Stay Weak

Inflationary pressures in the euro zone remained weak in July, suggesting inflation would fall in the coming months, according to an indicator designed to forecast cyclical trends in inflation.

The Eurozone Future Inflation Gauge (EZFIG) nudged up to 94.1 in July from June's 27-month low of 93.2, the Economic Cycle Research Institute (ECRI) said on Friday.

Germany was the only country in the bloc's big four which saw pressures increasing, with its future inflation gauge rising to 97.5 during the month from 94.0 in June. The gauges fell in Italy and Spain and held steady in France.

"As anticipated by the earlier downturn in the EZFIG, euro zone inflation has fallen in recent months," said Lakshman Achuthan at ECRI.

"Meanwhile, despite its latest uptick, the EZFIG remains near June's 27-month low. Thus, euro zone inflation is likely to retreat further in the coming months."

However, a preliminary release last week showed headline inflation in the euro zone rose to 2.6 per cent in August from 2.4 per cent in July, higher than market expectations for 2.5 per cent.

The European Central Bank raised its forecasts for 2012 inflation at its meeting on Thursday and expects it to remain in a range of 2.4 to 2.6 per cent, up from its previous prediction of 2.3 to 2.5 per cent.


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