• Eurozone flash estimate for October came in at -0.1% yoy, in line with consensus but 0.1pp higher than our own forecast. After slightly higher-than-expected figures in Germany and Spain, we had warned about upside risks to our call. We still think that prices were up 0.2% mom. With no breakdown available, it’s not easy to say what components drove the moderate surprise vs. our call. Judging from the German and Italian data, it could have been a mix of energy and core inflation.

  • What can be said with a high degree of confidence is that the rise in the yoy inflation rate vs. September was mainly driven by energy, with the steep decline in the price of oil products in October 2008 pushing up the yearly rate of change of energy prices. In contrast, food inflation probably declined a bit further in yoy terms. Core inflation should have remained stable, though the trend keeps pointing downwards.

  • Also out today, Italy’s CPI was reported at 0.1% mom, 0.3% yoy, in line with our forecast. We, therefore, confirm our projections for FOI ex tobacco.

  • The oil price rally has taken a breather, but the price of oil products is now rising strongly. Also due to a powerful unhelpful base effect, energy will push eurozone inflation in positive territory in November (our preliminary guess: +0.5% yoy). At yearend, we continue to see headline inflation at around 1% yoy.