| Germany: November inflation shows resilient underlying and non-core trends |
| 09.12.11 10:31 | |
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German final inflation data for November were in line with expectations. The HICP was confirmed at 2.8% y/y, edging down 0.1pp from October, similar to the CPI which also declined 0.1pp to 2.4% y/y. The report revealed that energy prices were more resilient than we expected, food inflation was instead weaker, underlying goods inflation was broadly in line with our forecasts while core services prices were on the stronger side. Overall, we remain of the view that energy prices will lead the decline of German inflation over the next few months, starting with December, while food inflation is likely to regain some momentum in the months ahead before starting to decline in late Q1 next year. As we show in more detail below, between the two non-core components, the outlook for food inflation is clearly subject to a large degree of uncertainty as the unprocessed food component has been characterised by elevated volatility in the past few months. Underlying goods prices remained at elevated levels on an historical basis. After peaking in October at 1.42% y/y - the highest level ever recorded - they edged down slightly in November. We expect underlying goods inflation to remain around November's level through 2012. Services inflation increased for the third consecutive month and we expect it to keep rising moderately in the next few months, before starting to decline in Q2 next year. Overall, we continue to expect German HICP inflation to moderate to 1.7% in 2012, after a projected 2.5% this year. We expect 2013 inflation to decline to 1.6% in 2013. Details Energy prices inched down to 11.0% y/y from 11.2% y/y, declining less than we expected (10.3% y/y). Food prices declined to 2.7% y/y, mainly because unprocessed food prices fell to 0.7% y/y from 1.5% y/y. Interestingly, the fall in unprocessed food inflation was due to base effects as during the month it increased 0.7%, printing the highest m/m reading since February this year. Underlying goods inflation was broadly in line with our expectations, declining to 1.12% y/y (BarCap: 1.22% y/y) in November from 1.41% y/y. Underlying services inflation rose to 1.69% y/y (above our expectation of +1.45% y/y) from 1.63% y/y in October, on account of transport price increases to 2.2% y/y from 1.9% y/y and miscellaneous service inflation which edged up to 2.0% y/y from 1.9% y/y. source: BarCap |
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