HICP inflation in Germany, Italy and Spain all surprised on the upside in February. On average, the actual prints were 0.4pp higher than forecast by consensus. The higherthan- expected inflation figures seemed to reflect the increase in the oil price during February, which has lifted gasoline prices and thus supported energy price inflation. Added to this it also seemed that food price inflation was higher than expected.
Based on the country figures released today, we expect euro inflation to increase to -0.2% y/y in February from -0.6% y/y in January (due for release on Monday). Hence, the euro area should remain in deflation in the near term, but the country figures released today suggest the period of deflation will be shorter than we had initially expected.
The relatively large, positive surprise reflects that food and energy price inflation are very volatile and account for the largest share of the absolute monthly variation in annual inflation. Energy price inflation explains above 50% of the monthly variation in annual headline inflation although it only has a weight of 10% of headline inflation.
German HICP inflation increased to -0.1% y/y in February from -0.5% y/y in January. The increase was rather broad based with higher inflation in the volatile energy and food prices and also in the core components. Looking at the monthly changes, there was an increase in household energy and fuels of 2.1% in February after a decline above 3.0% in both January and December.
Italian HICP inflation printed at +0.1% y/y in February, hence the country was not in deflation in February. In January inflation was -0.5% y/y and the 0.6pp increase followed a combination of higher food and energy price inflation. Housing, water, electricity and fuel prices increased 0.1% m/m, which was larger than we had expected. At the same time food prices increased again in February and the yearly change turned positive.
Spanish HICP inflation increased to -1.2% y/y in February from -1.5% y/y in January. In Spain the details have not been released yet, but there has been an increase in gasoline prices during February and we expect the higher inflation figure to reflect higher energy price inflation.
Recommended Content
Editors’ Picks
EUR/USD clings to gains near 1.0700, awaits key US data
EUR/USD clings to gains near the 1.0700 level in early Europe on Thursday. Renewed US Dollar weakness offsets the risk-off market environment, supporting the pair ahead of the key US GDP and PCE inflation data.
USD/JPY keeps pushing higher, eyes 156.00 ahead of US GDP data
USD/JPY keeps breaking into its highest chart territory since June of 1990 early Thursday, recapturing 155.50 for the first time in 34 years as the Japanese Yen remains vulnerable, despite looming intervention risks. The focus shifts to Thursday's US GDP report and the BoJ decision on Friday.
Gold closes below key $2,318 support, US GDP holds the key
Gold price is breathing a sigh of relief early Thursday after testing offers near $2,315 once again. Broad risk-aversion seems to be helping Gold find a floor, as traders refrain from placing any fresh directional bets on the bright metal ahead of the preliminary reading of the US first-quarter GDP due later on Thursday.
Injective price weakness persists despite over 5.9 million INJ tokens burned
Injective price is trading with a bearish bias, stuck in the lower section of the market range. The bearish outlook abounds despite the network's deflationary efforts to pump the price.
Meta takes a guidance slide amidst the battle between yields and earnings
Meta's disappointing outlook cast doubt on whether the market's enthusiasm for artificial intelligence. Investors now brace for significant macroeconomic challenges ahead, particularly with the release of first-quarter GDP data.