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During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

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Euro Zone Inflation Pressures Up


Inflation pressure struck a 5-1/2 year high in Europe in April and is steadily becoming a fact of life in Japan after many years when deflation was the problem, the ECRI institute said on Friday.

Increasing inflation in Germany and France pushed underlying price pressures in the euro zone to 5-1/2 year highs, an index from the Economic Cycle Research Institute showed.

That will do little to blunt the ECB's determination to hike euro zone interest rates when it meets next week.

Official data from the European Union confirmed pipeline inflation pressures were evident.

Euro zone producer prices were up 0.8 percent month-on-month in April and 5.4 percent on the year, fuelled by high energy prices, according to Friday figures which analysts said added to the case for a near-term interest rate rise.

The ECRI, which tries to flag turns in the economy via tailormade indices, said its Japan index showed inflation pressures there remained flat in April but near an eight-year high and likely to rise further.

The institute's Eurozone Future Inflation Gauge (EZFIG) rose to 103.4 in April from March's 102.2.

"With the EZFIG rising to a 5-1/2 year high in its latest reading, euro zone inflation pressures are clearly in a cyclical upswing," ECRI said.

For Japan, the equivalent index was unchanged at 98.6, down from the eight-year peak of 98.9 struck in February. "Japanese inflation pressures remain elevated," the institute said.

Core consumer prices in Japan have risen for six consecutive months and show the economy is finally escaping seven years of deflation. The core CPI, which excludes fresh food, rose by 0.5 percent in April, matching the fastest pace in eight years...

The ECRI gauge endeavours to anticipate cyclical swings in regional inflation rates and changes in official interest rate policy by measuring underlying inflationary pressures, rather than actual inflation rates.

The euro zone gauge uses a weighted average of ECRI indices for Germany, France, Italy and Spain...

The German index jumped to 91.5 from 87.2 in March, whilst the French one rose to 103.5 from March's 103.1.

In contrast, the gauge for Italy dipped to 101.2 from 101.5 and the Spanish index eased to 154.3 from 159.8...