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Enron Mail |
Italian inflation's decline continues City CPI (November) Actual: +0.2%mom, +2.4%yoy UBS Warburg: +0.2%mom, +2.4%yoy Consensus: +0.1%mom, +2.3%yoy Previous: +0.2% mom, +2.5%yoy Italian inflation continues its steady downward trend. This will go on. Producer prices inflation is falling even faster than CPI inflation. Moreover, wages remain muted, increasing slower than inflation this year. With the ongoing weakness of domestic demand all ingredients are thus in place for further fall in inflation. * Based on the city CPI, we see Italian prices up 0.2% in November (possibly only 0.1%), and inflation is likely to lose a further decimal point at 2.4% (possibly 2.3%). If confirmed, this would be the seventh consecutive fall in inflation and the lowest level of reached since April 2001. * We see inflation down in the coming months. The decline in domestic demand will create more spare capacity, and the fall in commodity prices will also help. Underlying pressures should thus unwind helping core inflation down. * The breakdown suggest that the transportation sector register a large fall in prices. This is the direct effect of falling oil prices. Despite the removal of the tax credit on fuel, gasoline prices have indeed declined. Data also provide some evidence that food prices are also receding to a more normal level. St?phane D?o Economic Research UBS Warburg Tel : +33 1 48 88 30 36 Fax : +33 1 47 63 48 08 Mob : +33 6 76 85 33 18 Stephane.deo@ubsw.com
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