What is causing inflationary recession

A fair question a TV presenter asked me last week: How come our economy remains steadfastly inflationary despite being already gripped by the recession?

The obvious answer attributes this phenomenon to the hefty increases in energy charges from last October.

True, but there is more to it if one bothers to analyse the Industrial Producer Price indices just published by the NSO. In the home market, prices to producers went up by 34.7 per cent throughout 2008 but decreased by 7.5 per cent for eurozone exporters and three per cent for elsewhere. Local producers, therefore (and consequently also local consumers) heavily subsidised exports, albeit not consciously. Good for the economy? Perhaps.

Not so sure, though. The Capital Goods sub-section increased by 21 per cent for domestic producers and decreased by one per cent for eurozone exporters.

What about the energy sub-section?

Hold your breath. A 47 per cent increase for the former and, obviously, not applicable for the latter. A resilient economy? I had better pass.