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.
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.
