About one month ago I wroute about Euro Area inflation: “troubling but transitory“. One month more of data are in. It is even more troublesome but also more transitory. The increase of the consumer price index is dominated even more by energy prices than one month ago. As the Euro Area is a net importer of energy (among other items: natural gas from Russia.). This particular kind of inflation is, to use confusing terminology, highly deflationary… (for the non-energy sectors).
Purchasing Power is transferred to Russia (and other energy exporters) and siphoned off from other sectors. The rational response: investing in energy saving (let’s commute less…) and green energy. The problem: production costs of natural gas are very low, especially labor costs. Production costs ofRead More »