NIRP DERP: A Chart Of What Europe Economy Really Looks Like

Curious what Europe's true economic state is? The chart below, showing Europe's annual inflation or lack thereof, and which just dropped from 0.5% to 0.4%, missing estimates of an unchanged print despite the ECB's ongoing and losing war with disinflation, and soon deflation, shows all you need to know.

From Eurostat:

And from Bloomberg:

Euro-area inflation (unexpectedly slowed in July to the weakest in almost five years, underscoring the European Central Bank’s concerns that the economy is too feeble to drive price growth.


Inflation was 0.4 percent compared with 0.5 percent in June, the European Union’s statistics office in Luxembourg said today. That is the weakest since October 2009 and below a median forecast of 0.5 percent in a Bloomberg News survey of 42 economists.


Having unleashed an unprecedented round of easing measures, the Frankfurt-based European Central Bank is seeking to rekindle price growth and help the 18-country bloc’s battered economy. For the past 10 months the inflation rate has been weaker than 1 percent, less than half the ECB’s goal, while joblessness has remained stubbornly near an all-time high for months. Adding to the risks are the geopolitical tensions between Russia and Ukraine, and conflicts in the Middle East.

Soundbites from 2012:

“This is most likely the trough in inflation, and inflation will move slowly upwards from here,” said Nick Kounis, head of macro research at ABN Amro in Amsterdam. “It seems unlikely the ECB will take fresh measures to ease policy further -- I don’t see this as a trigger for a large-scale quantitative easing program, as long as this proves the trough.”


“What will be key is more of an economic recovery,” said Johannes Gareis, economist at Natixis in Frankfurt. “It’s clear that inflation will stay under 1 percent for this year, because the output gap and the spare capacity in the labor market are so big that they can’t exert much upwards pressure on prices.”

Optimism still galores:

The ECB predicts economic growth of 1 percent this year, rising to 1.8 percent in 2016. It sees inflation at 0.7 percent for 2014, rising to 1.1 percent in 2015 and 1.4 percent in 2016.

For July, the core inflation rate, which excludes volatile items such as energy, food, alcohol and tobacco, clocked in at 0.8 percent, unchanged from the previous month. The cost of services rose 1.3 percent.

But there is really one phrase for all of this: NIRP Derp.


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