Germany's reported a shocking 24.2% yoy rise in its December PPI. This was far above the 19.4% consensus expected, and was generated by a 5% rise which was no less than 7.9SDs above historic seasonal trendsl 7.9SDs! Of course, at the heart of this was energy prices, which jumped 15.7% mom and 69% yoy, with natural gas up 122% yoy and electricity up 74% yoy.
Now, a 15.7% mom jump in energy prices is actually quite difficult to explain, since in dollar terms Brent oil prices fell 7.6% mom in December and natural gas prices fell 23.8% mom. Elsewhere in the world, this slight relaxation in energy prices contributed to calming inflationary pressures. What's going on in Germany?
Part of the answer is the continuing extraordinary rise in the price of CO2 emissions trading prices. The price of emitting a ton of CO2 in the EU rose a further 22% mom in December to Eu 79.92. So whilst in Euro terms, the price of a barrel of crude fell Eu8.2 to 73.6, the cost of the permission to use it rose by Eu5.2 to 32.3. Overall, the cost of using a barrel of crude, then, barely retreated at all in December, so Germany, among others Europeans, was denied the benefit of the falling oil price.
In yoy terms and in Euro, a barrel of oil rose 35.8% yoy in December to Eu83.13; but once you include the emissions, it was up 52% to Eu115.6. The emissions cost came to 28% of the total, a new record.
Things aren't going to look better in January, since already Brent crude is up 12.5% mom, and emissions prices are up another 2.1%.
In this inflationary year, nothing, I think, has risen faster than the EU's emissions permit: up 155% yoy, and still rising like a rocket.
Also a quick word on Taiwan's December export orders: these were up 12.1% yoy, which sounds modest, but was generated by a monthly movt 1SD above trend. So not bad. Particularly because when you look at the details, which shows that China and HK (24.5% of the total) rose only 4.5% yoy, Europe rose only 8.2%, and Japan actually fell 5.8%. Those are big big customers, and their demand growth is slowing.
