Dec Inflation Preview: Big Y/Y Jump In Energy Prices

Germany (28% of EZ HICP) - 1300UK Thu 4 January (after state-level data in the morning)

• Consensus expectations:
  • HICP: 3.9% Y/Y (2.3% prior) / 0.3% M/M (-0.7% prior)
  • CPI: 3.7% Y/Y (3.2% prior) / 0.2% M/M (-0.4% prior)

The headline rate is widely expected to re-accelerate on an annual basis, as energy subsidies depressed gas and district heating bills for private households in December 2022. However, both electricity and gas prices are expected to fall on the month.

• Services prices are expected to be pushed upwards by seasonal/statistical effects – a dynamic that has worked in both directions through the year. Package holiday prices (which have a 3.5% weighting in the 2023 basket vs 1.2% in 2022) tend to increase in December, while in November this component was a downside driver to the NSA prints.

Thursday's inflation data kicks off with North Rhine Westphalia at 0630GMT, comprising 21.1% of the German national CPI basket. The majority of states usually report their flash estimates around 0900 GMT (though sometimes can be earlier or later).

• The four states (excluding NRW) with weights above 5% in the CPI basket that usually release around this time are Bavaria (16.9%), Baden-Wuerttemberg (14.1%), Lower Saxony (9.4%) and Hesse (7.7%). In total, we should receive data accounting for 87% of the CPI basket by around 1000GMT.
• A reminder that Saarland (1.1% of the basket) already released data today. Headline CPI was 4.1% Y/Y (vs 3.7% prior), with household energy prices rising 15.8% Y/Y. There is no core CPI estimate in the Saarland release, but component level data provides a mixed picture. Within core goods. clothing and footwear prices accelerated while household furnishing softened. Within services, transport prices accelerated as expected but recreation/restaurant components both moderated in December.