Thanassis Stavrakis, AP
Any material signs of significant, unexpected global price inflation could send portions of the world’s capital markets into a tailspin. With many of the globe’s central banks printing money in one form or another in order to spur domestic economic growth, the threat of coming inflation appears to be a question of when and not if. The magnitude of the potential price inflation should influence the severity of the capital markets response.
Eurostat, a provider of European economic statistics, reports annual inflation in the Euro area decreased to 2 percent in January. Annualized inflation in the Euro area was reported to be 2.2 percent in December.
The lowest inflation rate reported in the Euro area, when comparing prices in January 2013 to prices for the same goods and services in January 2012, is in Greece. Annual inflation for this economically struggling country was reported at 0 percent.
Looking beyond the Euro area to the European Union, which includes 10 additional countries such as the United Kingdom, Poland and Sweden, annual inflation estimated for January was a modest 2.1 percent.
Romania was the European Union member nation with the highest annual inflation rate reported in January at 5.1 percent. Other notable annual inflation levels were reported in the United Kingdom and Italy at 2.7 percent and 2.4 percent, respectively.
Returning to the 17 countries in the Euro area, Eurostat indicated rising electricity prices were the most significant contributor to the year over year increase in aggregate prices. A primary detractor to the annual inflation comparison came from decreasing prices in the telecommunications sector.
Cost of services is a material portion of the overall inflation calculation methodology. In the Euro area, year over year cost inflation for services in January was preliminarily reported at 1.6 percent.
Overall, the inflation picture in the European Union remains subdued. In general, this same statement could be made about the inflation rate in the U.S. While inflation is reported to be somewhat higher in some of the emerging economies, the current global inflation figure remains less than concerning.
For now, the vast supply of cheap money being provided by the world’s central banks hasn’t yet resulted in widespread inflationary pressures.
Kirby Brown is the CEO of Beneficial Financial Group in Salt Lake City.
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