April Inflation: Services Decelerate, Core Goods Likely Soft

The German national flash April HICP print came in in line with consensus at +2.4% Y/Y (vs 2.4% cons; 2.3% prior) and +0.6% M/M (vs 0.6% cons; 0.6% prior).

• Headline, core and major sub-component inflation all came in closely in line with MNI's tracking estimates based on the state-level data.
• National flash CPI was +2.2% Y/Y (vs 2.3% cons; 2.2% prior) and +0.5% M/M (vs 0.6% cons; 0.4% prior). Core CPI (excl. food and energy) was 3.0% Y/Y (vs 3.3% prior).
• Of the major sub-components, services CPI was most closely watched and it decelerated to 3.4% Y/Y (vs 3.7% prior), while goods CPI increased to 1.2% Y/Y (vs 1.0% prior).
• The goods CPI acceleration came primarily on the back of a gas VAT increase from 7% to 19%. As both energy inflation and food inflation increased markedly on a Y/Y basis compared to March, but the acceleration in overall goods was quite contained in comparison, non-energy industrial goods inflation is likely to have been muted in April, as suggested by soft furniture and clothing price readings in state-level data.
• Taken alongside the slightly lower-than-expected Spanish inflation print from earlier today, there might be slight downside risks to Wednesday's Eurozone-wide HICP consensus, which sits at 2.4% Y/Y for headline.
• While the exact outcome of the print will be less important for the ECB's June meeting (as a wide set of Governing Council members have indicated a cut is strongly to be expected barring a clear upside surprise), the underlying developments will be eyed closely re the rate path going further ahead.