Inflation in February

March 19, 2009

Several countries have reported higher-than-forecast inflation this month, this morning’s Canadian figures constituting the latest example.  Canada’s CPI rose 0.7% in February not seasonally adjusted and 0.4% when adjusted.  Core CPI, up 0.3%, also exceeded street estimates.  On-year inflation increased to 1.4% from 1.1% in January, and core failed to drop under the January 12-month pace of 1.9%.  Canada has plenty of company.  U.S. and euro area consumer prices also went 0.4% in February.  Within the euro area, monthly CPI increases amounted to 0.7% in Germany and Finland, 2.3% in Belgium, 1.0% in The Netherlands, and 0.4% in France.  Norway’s index shot up 1.1%.  Two common threads in many of these reports were the presence of food and housing costs, while oil prices have bounced to more than $50 after earlier free-falling from $147 to less than $35 per barrel.  Deflation is less of a clear and present danger than feared a month ago, but it remains a risk that needs to be taken very seriously given the much lower trajectory of real economic activity than its long-term trends.  Upstream price pressures moreover point to less, not more, inflation as 2009 unfolds.

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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