U.S. Inflation Versus E.U. Recession

By Douglas A. McIntyre Published Aug 13, 4:26PM EDT

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Thursday is going to be a key economic event day for traders who trade just about everything. You could almost consider it an Olympic boxing match titled US INFLATION VS. RECESSION" as a catch phrase.

Around 5:00 AM EST we will get the latest data out of the EuropeanUnion regarding its GDP levels, but they also release data with aharmonized CPI. The long and short of it is that EU’s GDP for thequarter is expected to post somewhere in the vicinity of -0.3% for thequarter. July’s monthly CPI for the EU is expected to be around -0.1%.

In the USA at 8:30 AM EST we’ll get to see the JULY CPI data as the consumer prices asa measure of inflation for you and me. The July reading is expected toshow a +0.4% nominal CPI and a core CPI of +0.2% (backing out food,energy, and anything you use).

These are both highly important reports for traders. July was thefirst month that oil really began its drop and it is right after manycompanies came out with waves and waves of price hikes on energy andmaterials costs. We want to alert you that this number is a total wildcard because prices for materials and energy have already backed off asmany hikes were supposed to kick in. There are so many othervariables, but this represents a large wild card that could arguably goeither way because of where we are in both the business cycle and wherewe are in the inflationary cycle.

But the EU’s GDP is also a key metric to watch. If it is toorecessionary then Mr. Trichet of the ECB will have to get off his, wellyou know what, and finally start to cut overnight interest rates. Hehas avoided this to avoid even more inflation, but he has finallyrealized that it is causing a recession. Europe may not have all thesubprime and credit woes that the U.S, has been going through, butoverall their broad economy is slowing faster than the U.S.

If you wanted to know what a perfect storm is that would create a verysharp rise in the US Dollar and therefor a likely drop in oil and gold,you would want to see a much weaker EU GDP number and you would want tosee a very low inflationary reading in the U.S. There’s no such thingas a sure bet, but that is what we are hoping for.

Jon C. Ogg
August 13, 2008

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.