Eurozone: Annual HICP inflation to be +1.4% in May – Goldman Sachs

Pierre Vernet, Research Analyst at Goldman Sachs explains that on Wednesday, 31 May, Eurostat will publish the Flash estimate of the Euro area Harmonised Index of Consumer Prices (HICP) for May and they expect Euro area annual HICP inflation to be +1.4% in May (down 44bp to +1.446% to three decimal places), after +1.9% in April.

Key Quotes

“Core inflation (May, flash) – GS: +1.0%yoy, Previous: +1.2%yoy. We forecast Euro area core inflation (on the measure excluding energy, food, alcohol and tobacco prices) to edge down to +1.0%yoy in May, after +1.2%yoy in April (down 23bp to +1.02%yoy to two decimal places). Our forecast implies a modestly positive seasonally-adjusted sequential out-turn, and in part reflects a payback from last month’s robust gains in services price inflation (and, in particular, in Italian and Spanish services inflation), which was triggered to a large extent by a combination of seasonal factors and increases in administered prices. Price increases in a number of other core categories/countries (e.g., French healthcare) are likely to prevent area-wide core inflation from turning negative on the month.”

“At the EMU-4 level, we expect:

• Germany inflation (May, flash) - GS: +1.5%yoy, previous: +2.0%yoy
• France inflation (May, flash) - GS: +1.0%yoy, previous: +1.4%yoy
• Italy inflation (May, flash) - GS: +1.7%yoy, previous: +2.0%yoy
• Spain inflation (May, flash) - GS: +2.3%yoy, previous: +2.6%yoy”