Euro-Area Inflation Accelerates to Fastest Since 2008

Saudi crude oil price hikes are nudging up the various inflation indices some, but most core measures remain tame and the headline CPI increases will only be a one time event if/when crude prices stabilize, as aggregate demand remains relatively weak and inventories plentiful in general.

However, the anti inflation rhetoric from the CB’s, which still fail to recognize the currency is a (simple) public monopoly, will intensify as they all believe it’s inflation expectations that cause actual inflation, and so they are continuously in action to manage those pesky expectation things. Call it another example of ‘Aztec Economics’ (the Aztecs performed human sacrifices to make sure the sun came up every morning).

EU Headlines:
Euro-Area Inflation Accelerates to Fastest Since 2008

Europe Keeps Interest Rates Steady on Concern About Economic Growth

Trichet Puts Inflation Fighting Back on ECB Agenda

ECB’s Weber Says Inflation Risks ‘Could Well Move to Upside’

EU Bailout Rates May Need to Drop for Aid to Work: Euro Credit

Euro Will Be Even Stronger Currency, EU’s Almunia Tells Negocios

Euro-Area November Exports Increase 0.2%, Imports Rise 4.4%

Weber Says German Economic Growth Will Moderate Going Forward

German Inflation Expectations at Nine-Month High as CPI Surges

Spain Underlying Inflation Rate Rises to Highest Since Feb. 2009

Euro-Area Inflation Accelerates to Fastest Since 2008

By Simone Meier

January 14 (Bloomberg) — European inflation accelerated to the fastest pace in more than two years in December, led by surging energy costs, complicating the European Central Bank’s efforts to deal with the sovereign debt crisis.

Inflation quickened to 2.2 percent in December from 1.9 percent in the previous month, the European Union’s statistics office in Luxembourg said today. That’s the fastest since October 2008 and in line with a Jan. 4 estimate. European exports rose 0.2 percent in November from the previous month when adjusted for seasonal swings, a separate report showed.

Crude-oil prices have jumped 10 percent over the past three months, fueling inflation just as austerity measures threaten to hurt economic growth. ECB President Jean-Claude Trichet said yesterday that inflation in the euro region may remain above the bank’s 2 percent ceiling over the coming months, signaling he is prepared to raise interest rates if needed.

“Overall, the latest from the ECB reveals some increase in concern about euro-zone inflation dynamics,” said Simon Barry, chief economist at Ulster Bank in Dublin. “It doesn’t appear that that trigger is going to get pulled in the next few months, but the chances of a hike by the end of this year have risen.”

The euro declined against the dollar after the data, trading at $1.3354 at 10:02 a.m. in London, down 0.1 percent on the day after being up as much as 0.7 percent earlier.

Energy Prices

The increase in energy prices leaves households with less money to spend just as governments from Spain to Ireland toughen budget cuts. The ECB last month forecast euro-area inflation to average around 1.8 percent this year and about 1.5 percent in 2012.

Trichet, whose central bank has been forced to provide banks with emergency liquidity and purchase governments bonds to fight the crisis, said yesterday that he sees signs of “upward pressure” on inflation over the coming months. Inflation is “likely to stay slightly above 2 percent, largely owing to commodity-price developments, before moderating again towards the end of” 2011, he said at the press conference in Frankfurt.

Euro-area core inflation, which excludes volatile costs such as energy prices, held at 1.1 percent in December, today’s report showed. Energy costs rose 11 percent from a year earlier after increasing 7.9 percent in November.

The euro’s depreciation has helped drive up import costs while also making goods more competitive abroad just as the global recovery gathered strength. In Germany, Europe’s largest economy, plant and machinery orders surged 43 percent in November from a year earlier and business confidence jumped to a record last month.

German ‘Engine’

Siemens AG, Europe’s largest engineering company, said on Jan. 11 that it’s confident of reaching its full-year targets. The Munich-based company is “off to a good start,” Chief Financial Officer Joe Kaeser said on the previous day.

Euro-area imports increased 4.4 percent in November from the previous month and the region had a trade deficit of 1.9 billion euros ($2.6 billion) after a surplus of 3.5 billion euros, today’s report showed.

“Germany will remain the region’s growth engine,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “Companies in countries with buoyant demand will find it easier to pass on higher costs while some nations remain very weak.”

Euro-area exports to the U.S. rose 18 percent in the 10 months through October from a year earlier, while shipments to the U.K., the euro area’s largest market, increased 11 percent. Exports to China surged 38 percent. Detailed data are published with a one-month lag.