Monday's Economic Releases: Inflation Starts The Week
2. Euro-Zone Producer Price Index
Australian TD Security Inflation (AUG) (00:00 GMT; 20:00 EST)
Consensus: n/a n/a
Previous: 0.2% 3.5%
Outlook: Inflation pressures in Australia may have continued to mount in August depending on the release of TD Securities report. Ultra-low unemployment of 4.8 percent, rising wages, and GDP expansion of 3.1 percent have perpetuated price growth, even when disregarding volatile factors, such as energy and food. Furthermore, the Reserve Bank of Australia has been forced to keep rates over 5 percent since December 2003 as the economy refuses to cool, and most recently hiked the benchmark to 6.00 percent on August 1st. Should Australia continue to see escalating inflation this month, RBA Governor Ian Macfarlanes August 18th statement that, it's more likely that there will [be further increases in interest rates] than there won't could come to fruition sooner than many think.
Previous: Australian inflation, as measured by TD Securities, rose for the fifth consecutive month in July at a pace of 0.2 percent. While the year over year rate slowed to 3.5 percent that same month, the figure is still well above the Reserve Bank of Australias medium-term target range of 2-3 percent. Leading the price acceleration was a 19 percent rise in the cost of gasoline for 2006, as well as a 52 percent gain in the price of fruit in Q2 as a result of the March cyclone, which destroyed 80 percent of Australias banana crop. Excluding these volatile factors, core inflation was a bit milder with a 0.2 percent rise in the month of July and an annual rate of 2.4 percent. The RBA, however, takes both measures into account and cited the firming of underlying inflation as a major reason for its interest rate hike to 6.00 percent on August 1st.
Euro-Zone Producer Price Index (JUL) (09:00 GMT; 05:00 EST)
Consensus: n/a n/a
Previous: 0.2% 5.8%
Outlook: Producer price inflation has held to a steep pace of acceleration in recent months, and is expected to have remained that way in July with an anticipated gain of 0.5 percent for the month. Producers have already been feeling the effects of surging energy prices and there are signs that they are starting to pass these on amid stronger domestic demand, which subsequently was one of many reasons why the European Central Bank hiked rates to 3.00 percent on August 3rd. While the ECB opted to hold on raising rates in the most recent meeting on August 31st, the central bank signaled that policy tightening wasnt off the table quite yet by stressing the need for strong vigilance in the face of price stability that remains elusive, leaving potential for a hike to 3.25 percent in October.
Previous: Inflation for producers gained again in the month of June by 0.2 percent, putting the annual rate near a five-year high at 5.8 percent. PPI has been mounting for some time now, as sustained energy cost increases have put the squeeze on profit margins. However, the Euro-zone economy has improved quite a bit in recent months as GDP accelerates and domestic demand improves, allowing producers to pass on costs to consumers. Although CPI has not seen the follow through of price growth quite yet, it appears as though it may only be a matter of time.