Inflation data in Germany and Spain worrying for eurozone

[Jonathan Fairfield]

Inflation data in Germany and Spain worrying for eurozone

Driven by low energy costs, consumer prices in Spain fell at their fastest rate in seven months in September, according to early estimates from the country’s National Statistics Institute (INE).

EU-harmonised consumer prices fell 1.2 percent year-on-year – more than expected.

National prices also slipped again – by 0.9 percent on an annual basis.

Meanwhile retail sales continued to rise on the back of growing demand.

The overall trend for Spanish inflation for the last 21 months is once again negative.

Spanish consumer prices have held below two percent for 26 straight months, according to the country’s National Statistics Institute.

Early estimates in Germany show annual inflation there turned negative in September for the first time in eight months.

Reports say the weaker-than-expected reading could push the eurozone rate below zero, boosting the case for the European Central Bank (ECB) to take more action.

The EU-harmonised consumer index showed a decline of 0.2 percent year-on-year, while the national inflation yardstick showed zero change.

The figures come despite the ECB’s quantitative easing programme aimed at pushing inflation up to near two percent – the level it considers conducive to economic growth for the eurozone.

Final data in Germany based on all 16 regional states are due to be published on October 13.

-- (c) Copyright Euronews 2015-09-30

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Economic clap-trap.

The world has had long periods of growth and deflation together. Inflation is not a precursor to economic growth and never has been.

The inflation targeting by central banks is aimed at ensuring the banking system does not have defaults. They pray that inflation busting pay increases will be given, allowing even more debt to be carried on the bent shoulders of the already deeply indebted populations.

The "inflation" numbers generated by an army of economists are nonsense. They massage and mess about using vague notions such "hedonics" to produce a meaningless number.

And so are the GDP numbers. In the UK the "imputed rents" are higher than the total contribution of the manufacturing industry. And what are these "imputed rents"? Well, it is some figure pulled out of a hat that attempts to assess the rents that would be paid by house owners if they were renting their own property. That's right, it is not even a real contribution to GDP, but some imaginary number. Wouldn't be so bad, but it is larger than the contribution of industry. Awesome.

And if the GDP is going to, in some way, indicate the prosperity of the nation, then it should be GDP/capita, not total GDP.

For those of you who got this far in my rant. You might also be interested where the 2% inflation target came from. The Kiwis are guilty. A couple of decades ago some Kiwi was a bit fed up with inflation eroding his savings, so the had a meeting. After the Hakka things were getting a bit drawn out, so one guy piped up and said, "Bugger it, let's make it 2%". And so it came to pass. There is no mass of theory behind it, it's just a number dreamed up in New Zealand.