The ECB is still recklessly delusional.
By Wolf Richter for WOLF STREET.
Wholesale prices in Germany – an indicator of what is further up in the pricing pipeline for consumers and businesses – spiked by 16.6% in November, from a year ago, the worst increase in the data going back to 1962, and up from 15.2% in October, and from 13.2% in September, the German statistical office Destatis reported today:
Given the decline in wholesale prices last year, and to eliminate the resulting “base effects” that everyone has been dragging out to brush off this bout of red-hot inflation, it’s helpful to look at the month-to-month increases over the past six months: Annualized June through November, wholesale inflation spiked by 13.6%.
And to see beyond the base effect by a different method, over the past two years, so since November 2019, wholesale inflation spiked by 14.5%, jumping right over the trough in the middle.
The index values of wholesale inflation show this historic spike without any of the base effects and other excuses:
Here are some of the biggest winners by category, price changes compared to a year ago:
- Mineral-oil products: +62.4% year-over-year.
- Ores, metals, and semi-finished metal products: +60.3%
- Timber: +41.1%
- Grains, raw tobacco, seeds, and animal feed: +30.3%
- Agricultural raw materials and live animals: +21.7%
- Milk, dairy products, eggs, vegetable oils: +11.8%
- Coffee, tea, cacao, and spices: +14.1%
- Lumber, construction materials, paints, sanitary ceramics (toilets, ceramic washbasins, etc.): +15.3%
- Flour and wheat products: +7.5%
All product categories showed year-over-year price increases, and none showed price declines. Everyone is raising prices and passing them on to the next business in line, and those businesses are paying those prices, confident that they can pass them on, ultimately to the end user, either a business or the consumer.
And it has been filtering into, but with a lag, consumer price inflation in Germany, which reached 5.2% in November, the highest since 1992.
Germany’s surging consumer price inflation has also been brushed off with the infamous “base effects,” including those linked to the VAT reductions in 2020. The Fed too had brushed off the US inflation with the “base effect.” But sooner or later, these excuses are going to run out of base effects, and in Germany this will happen January 2022, when inflation pure and simple will be seen just raging on its own.
The ECB, with an eye on the Fed, has been even more reckless in talking away the inflation that is now raging in many parts of Europe. But given the recent data, and given the U-Turn by the Fed on inflation, the ECB will likely but gradually and far behind even the Fed acknowledge that this is a massive problem that won’t just go away on its own.
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