Something for your Espresso: Producer deflation and a cyclical rebound
Most recent trends point to a combo of outright deflation in the producer leg paired with short-term cyclical optimism. It almost sounds too good to be true given what we have been through. Hello, Goldilocks (for the time being).
Good Morning from Europe.
The disinflation or do I dare say deflation in European producer prices continues. Both Portuguese and German PPIs are now (almost) in deflationary territory and the strength of the overall European economy / consumer will now decide to which extent this will be passed through to consumers. The German PPI for June printed at -0.3% MoM and 0.1% YoY.
If the CPI remains in >2% territory given these PPI numbers, it is hard to construct a negative narrative for equities as margins will gain from such a scenario.
Chart 1: Deflation in European PPIs
Most recent trends point to a combo of outright deflation in the producer leg paired with short-term cyclical optimism. It almost sounds too good to be true given what we have been through. Hello, Goldilocks (for the time being).
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