Energy costs pull inflation higher
Overview: Inflation in September came in above expectations in both the US and euro area. Momentum in underlying inflation remains rather stable despite higher energy costs, but indirect effects from the energy shock are starting to show up in core goods inflation.
Inflation expectations: Inflation expectations have been stable in the past month. Both short-term and longer-term expectations have moved sideways. Survey-based inflation expectations have also been stable.
US: Headline CPI rose 3.7% y/y, up from 3.4% in August, mainly driven by a further uptick in fuel prices. Core CPI increased 2.6% y/y, up from 2.4%, with shelter inflation the main contributor. Other services did not look particularly hot, as services excluding energy, medical care and housing rose 0.3% m/m SA, in line with our expectations and well below the 0.7% increase in August. We do not think the CPI release added enough new concerns for the Fed to hike as soon as the October meeting.
Euro area: Headline inflation increased to the highest level in three years at 3.8% y/y in September from 3.2% y/y, which was marginally above expectations of 3.7% y/y. The uptick in HICP was driven mainly by energy and food inflation, while underlying inflation pressures remained more muted. Core inflation increased in line with expectations to 2.5% y/y (cons.: 2.5%, prior: 2.4%). We are seeing momentum in core goods picking up marginally due to indirect effects of the energy shock, but the spillovers from the shock to underlying inflation remain relatively small.
China: PPI rose in September from 3.8% y/y to 5.0% y/y as commodity and chip prices rose. Export prices were up 15.1% y/y as chips/electronics export prices increase sharply. Core inflation was flat at 1.0% y/y.
Author
Danske Research Team
Danske Bank A/S
Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.
