Tuesday, May 11, 2021

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1.25pm GMT

The latest inflation data from Germany shows that consumer prices rose last month.

The German Consumer Price Index increased 1.3% year-on-year in February, up from 1.0% in January, and slightly ahead of forecasts.

German #Inflation keeps accelerating in Feb. CPI rose 1.3% after 1% in Jan and faster than expected 1.2%. pic.twitter.com/hmI7p6z7Tq

GERMAN CPI (MOM) (FEB) ACTUAL: 0.7% VS 0.8% PREVIOUS; EST 0.5%

GERMAN CPI (YOY) (FEB) ACTUAL: 1.3% VS 1.0% PREVIOUS; EST 1.2%

GERMAN HICP (MOM) (FEB) ACTUAL: 0.6% VS 1.4% PREVIOUS; EST 0.5%

GERMAN HICP (YOY) (FEB) ACTUAL: 1.6% VS 1.6% PREVIOUS ; EST 1.6% credit: @FirstSquawk

In fact, there will be a series of one-off factors pushing up headline inflation. In the short run, it will mainly be higher energy prices driving headline inflation. But when economies reopen, price markups in sectors most hit by the lockdowns will also add to upward pressure on inflation.

Finally, the full swing of the German VAT reversal will only unfold in the second half of the year. Taking all these factors into account, German headline inflation could eventually even range between 3% and 4%, eurozone inflation could breach the 2% level this year.

Germany: Inflation accelerates in February | Snap | ING Think – The national inflation measure accelerated further in February and did little to quieten the discussions around potential ECB reaction to higher yields. We… https://t.co/XsDhWpcJY4

12.59pm GMT

Here’s a thought to ponder over lunch… what happens to the world economy next year, and beyond?

Kit Juckes of Société Générale warns that this year’s recovery could collapse like a souffle once the initial post-lockdown spending rush fades, especially if governments tighten spending too soon.

The bigger long-term issue, is what happens to growth after 2021. This year will see an uneven recovery, but a recovery all the same.

There is lots of slack and pent-up demand in most developed economies. Vaccine delivery and the end of restrictions on movement will deliver benefits, but what comes next? There is a very real danger that the initial recovery is stronger but more short-lived than expected. Will we all be going out as much in 3 years’ time as we did before Covid? Will restaurants and bars, cinemas and theatres, all reopen? Will families with two working parents be as quick to leave their children behind in the next few years? Has the revolution in labour-saving technology accelerated as a result of the pandemic?

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