Encouraging Disinflation Dynamics

A dovish reaction in Bunds there to that prelim September HICP reading which came in at 4.3% Y/Y vs 4.5% expected (the 4.5% CPI was right in line with MNI's state-level based estimate, as did core CPI at 4.6%).

• There's no core HICP estimate released in the prelim data but there may have been some encouragement in sharp drop in goods inflation to 5.0% Y/Y from 7.1% Y/Y in August - the collapse in energy prices, again on base effects, to 1.0% Y/Y from 8.3% prior, will have done much of the heavy work in that disinflation. Food prices slipped to 7.5% Y/Y from 9.0%. Ex-food and energy goods inflation looks to have been well below 4% Y/Y, a sign of improving core dynamics overall.
• We knew that Services prices would slip sharply Y/Y on transport base effects and it did, to 4.0% Y/Y from 5.1% prior.
• Overall while we await monthly SA data for Germany the overall disinflation trend after the high base effects of the summer appears to be going more or less as expected.
• The Eurozone-wide figures out Friday are likely to come in below expectations set before today's Spanish / Belgian / German prints.