Remember when this past weekend [5], as part of its stress test "worst case" scenario, in all its wisdom the ECB decided not to stress test a deflationary outcome in Europe's immediate future...
[6]
Despite the market clearly screaming "deflation, deflation, deflation"...
[7]
... because as ECB governor Constancio said "the scenario of deflation is not there because indeed we don't consider that deflation is going to happen."
Well, don't tell the ECB, but according to just reported October regional inflation data for Germany, the country that is supposedly Europe's growth dynamo is now in outright deflation:
- Brandenburg CPI -0.3%, Previous 0.0%
- Hesse CPI -0.2%, Previous 0.1%
- Saxony CPI -0.2%, Previous 0.1%
- Bavaria CPI -0.3%, Previous 0.1%
And lest someone think this is purely a "core" phenomenon, Spain also reported October CPI which was not the balmy 0.0% expected but a negative print as well, at -0.1%.
So, is it already time to rerun "the most successfull and thorough European stress test" yet? Judging by the clobbering Italian banks have gotten virtually every day in the past week, it is probably not a bad idea.
