Broad-Based Disinflationary Progress

Italian inflation decelerated much more quickly than expected in November according to flash estimates, with HICP printing 0.7% Y/Y (1.1% consensus, 1.8% prior) and -0.4% M/M (-0.1% consensus, 0.1% prior). CPI similarly decelerated to 0.8% Y/Y (1.0% consensus, 1.8% prior) and -0.4% M/M (-0.2% consensus, -0.2% prior).

• The breakdown from IStat points to a big drop in energy prices as the main driver in the CPI deceleration (from -17.7% to -22.5% for unregulated prices and -31.7% to -36.0% for regulated prices), a dynamic that was widely expected.
• However, the overall disinflation was impressively broad-based.
• Core inflation (ex-energy/fresh food) slowed to the lowest level since May 2022, at 3.6%, vs 4.2% prior on a CPI basis.
• Goods price inflation fell to -1.3% Y/Y (0.0% prior), with services slowing to 3.7% from 4.1%. Goods categories saw disinflation across the board: durables +2.9% (3.1% prior), non-durables 3.2% (3.9% prior), semi-durables 1.9% (2.2% prior).
• A slowdown in processed food, recreational/cultural/personal care services, and transport services were disinflationary, with unprocessed food inflation conversely picking up.
• While the core reading remains elevated, it is clearly headed in a disinflationary direction - with ex-energy goods inflation below the overall core index, services prices will be key to watch for further progress.

Source: IStat