Eurozone Growth is Slowing
'Despite all the apparent optimism you can find round and about, the Eurozone is in fact slowing, the latest industrial output data from France seem to make this abundantly clear. What I find hard to understand is how so many people can have been wrong-footed on this.
The worst offenders are definitely over at Morgan Stanley. Steven Roach leads the way, but Eric Chaney isn't far behind. And Brad Setser - and in particular his guest poster Charles Gottlieb of the Center for European Policy Studies (CEPS also seems to be way off target here) - seems to have fallen hook line and sinker.'
'The inflation rate in Germany, Europe's largest economy, dropped to the lowest level in more than 2 years in September after oil prices retreated from a record.
Consumer prices rose 1.1 percent from a year earlier after increasing 1.8 percent in August, the Federal Statistics Office in Wiesbaden said in a faxed statement, using a harmonized European Union method. Economists expected an inflation rate of 1.2 percent, according to the median of 28 estimates in a Bloomberg News survey. From August, consumer prices fell 0.4 percent.'
Inflation is being topped and tailed by the recent sharp drop in crude oil prices,'' said David Brown, chief European economist at Bear Stearns International Ltd. in London. ``The expected slowdown in euro-region inflation should not stop the ECB hiking to 3.5 percent in this cycle, but it should make the ECB think long and hard about raising rates any higher next year.''
At least seven ECB policy makers, including President Jean- Claude Trichet and Germany's Axel Weber, said in the past two weeks they'll exercise ``strong vigilance'' against rising prices, words used in the past to signal a rate increase is imminent. The ECB expects inflation to exceed its limit of just below 2 percent for an eighth straight year in 2007.'