Inflation in Europe - Cost-Push drivers
GLOBAL MARKETS
Transportation Costs
AIR: HIGH | SEA: VERY HIGH
EUROZONE
Wage Growth
FADING | NOT INFLATIONARY
EUROZONE
Capacity Utilization
COOL | NOT INFLATIONARY | 77.9%
Insights
CONCEPT
We monitor core production costs that can eventually bleed into consumer prices: (1) Global Supply Chains - the cost of moving goods around the world, (2) Wages vs productivity - how much more companies are paying workers relative to output, and (3) industrial capacity - how hot factories are running When those systems get stressed, prices go up.
CURRENT READINGS
- Wage growth in Europe is elevated. Hourly wage growth is falling against a negligible progress in hours worked - any inflation impact is unlikely.
- Deep Sea freight costs are currently high, in the top range of 10-year observations and continuing to generate inflation pressures. Air freight costs are elevated: air transportation costs remain relatively high and volatile, pointing out to ongoing inflation pressures.
- Finally, at 77.9%, EU industrial capacity utilization is is limited and declining, and remains below the historical limit that anticipates emerging inflation pressures.
MARKET IMPLICATIONS
Taking all this together, production activities offer mixed views with some cost-push pressures that could marginally contribute to rising prices.
Remember, inflation is a three-headed beast. It's driven by demand-pull (too much money chasing too few goods), cost-push (what we’re tracking right here), and market expectations. Keeping an eye on all three is how you stay ahead of the curve.