Global inflation watch: Diverging inflation trends
|Overview: Inflation trends diverged in November. Service price pressures remain sticky in the euro area, but in the US inflation cooled. That said, the delayed datacollection due to government shutdown might have distorted the picture. Shortterm inflation expectations between the euro area and the US have converged closer to each other, driven particularly by a decline in the latter. Oil and natural gas prices have declined notably, while metal prices continue moving higher.
Inflation expectations: Short-term market-based inflation expectations have remained stable in the euro area but declined in the US, while long-term measures have remained steady. US consumer expectations have declined modestly.
US: November CPI landed clearly below expectations, with headline inflation slowing to 2.7% y/y (Sep. 3.0%; consensus 3.1%) and core inflation to 2.6% (Sep. 3.0%; consensus 3.0%). Note that October CPI release was cancelled due to the government shutdown, so monthly inflation estimates are not available. Majority of the slowdown was explained by cooling housing inflation, but price pressures across other goods and services were also lower than expected. The data might have been distorted by later-than-usual data collection period coinciding with Black Friday. If this was the case, inflation should re accelerate in December.
Euro area: Inflation in the euro area remained at 2.1% y/y in November and core inflation was also unchanged at 2.4% y/y as services inflation rose to 3.5% y/y and goods inflation fell to 0.5% y/y. The important momentum in services inflation was like October at 3.4% in the 3m/3m SAAR measure. Hence, services inflation remains elevated due to continued high wage growth which surprised on the topside in Q3 at 4.0% y/y compared to ECB’s expectations of a decline to 3.2% y/y. While energy inflation is expected to pull inflation below target 2026Q1 the continued pressure in underlying inflation is a hawkish argument for the ECB.
China: November CPI increased from 0.2% y/y to 0.7% y/y pulled up by a rise in food inflation. Core CPI was flat at 1.2% y/y. PPI stayed in deflation at -2.2% y/y.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.