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 FIG Rises

Underlying price pressures in the euro zone rose in October, pushed up by inflationary influences in Italy, Spain and Germany, an index compiled by the Economic Cycle Research Institute showed on Friday.

ECRI, which designs indices aimed at predicting business cycles in leading economies, said its Eurozone Future Inflation Gauge (EZFIG) climbed to 98.3 in October from an upwardly revised 96.8 in September.

"The EZFIG has been rising gradually and is now well above its December 2003 low (of 91.4)," ECRI said in a statement. "Meanwhile, actual inflation in the euro zone has also begun creeping up, in line with the earlier upturn in the EZFIG."

The gauge aims to anticipate cyclical swings in the region's inflation rate and changes in official interest rate policy by measuring underlying inflationary pressures, rather than actual inflation rates.

It is similar to ECRI's inflation indices for the United States, Britain and Japan.

The gauge for Germany rose to a three year high of 85.1 from an upwardly revised 82.7 the previous month.

"(The German index) has remained in an uptrend since the beginning of the year, suggesting that German inflation is not likely to ebb in the months ahead," ECRI said.

The Spanish index edged up to 132.5 in October from an upwardly revised 128.5, while the Italian index also nudged higher, to 101.9 from 101.4.

By contrast, inflationary pressures were flat in France, where the gauge stood at 102.0, unchanged from September's upwardly revised reading.

"After rising steadily since early 2003, the (French index) has eased off recently," ECRI said. "Although the decline in (it) is not pronounced, a continued decline would be consistent with a cyclical downturn in French inflation."

The euro zone gauge uses a weighted average of ECRI's indices for Germany, France, Italy and Spain...