Core Goods Pipeline Pressures Yet To Stall Disinflation Progress (1/2)

After peaking at 6.8% Y/Y in February 2023, Eurozone non-energy industrial goods (“core goods”) inflation has moderated for the last 16 consecutive months, last 0.7% Y/Y in June 2024.

• The acceleration of core goods inflation between 2021 and Feb 2023 was a combination of a post-pandemic rebound in demand alongside supply chain pressures from both the pandemic and the Russia/Ukraine war.
• The easing of both these forces has allowed base effects to pull core goods inflation lower on an annual basis over the past 16 months.
• This has seen the proportion of overall core inflation that core goods is responsible for fall from 40-50% in 2022 to less than 10% in June 2024.
• However, renewed tensions in the Middle East have contributed to an uptick in various pipeline pressures (see charts), which have started to be reflected in consumer goods PPI metrics.
• Industry/retail expected prices in the European Commission’s business survey have also levelled out in recent months.
• The July flash inflation data, due next week, provides the next opportunity to judge the progress of core goods inflation.