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EUROPEAN INFLATION: German State-Lvl Details Show Energy Drop, Sticky Services

EUROPEAN INFLATION
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Looking a bit closer at this morning's German state level September inflation data, goods disinflation appears to have continued, while for services, the data points towards some ongoing stickiness. Energy stands out as the downside driver.

  • On energy: We see the category broadly in the negative mid-7% range, amid both base effects and a sequential drop, which likely was driven by lower pump prices. While our estimate here is only based on states accounting for around 50% weighting of the national basket, which adds some uncertainty, a downside contribution vs August on the yearly rate should be clear.
  • Looking at the categories with heavy services weighting, we see healthcare at 2.5-2.6% Y/Y (2.7% Aug), communication largely unchanged from August's -1.2%, recreation and culture at 1.4-1.5% Y/Y (1.2% Aug), education at 5.5-5.6% Y/Y (5.1% Aug), and restaurants and hotels around 6.2% (6.2% August). The mixed-weighting transport category should come in broadly around -1.7% Y/Y (-0.2% Aug), consistent with lower energy prices.
  • Food inflation appears to have seen little change in September, at around 2.1-2.2% Y/Y (2.1% Aug).
  • Core goods might have seen some slight disinflation again - we see clothing and footwear at around 2.3% Y/Y (2.6% Aug) and furnishings and household equipment at around -1.1% (-0.7% Aug). Supply chain disruptions seem to pose an upside risk here a couple months ago appear to not have made their way through to consumer prices (yet).
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Looking a bit closer at this morning's German state level September inflation data, goods disinflation appears to have continued, while for services, the data points towards some ongoing stickiness. Energy stands out as the downside driver.

  • On energy: We see the category broadly in the negative mid-7% range, amid both base effects and a sequential drop, which likely was driven by lower pump prices. While our estimate here is only based on states accounting for around 50% weighting of the national basket, which adds some uncertainty, a downside contribution vs August on the yearly rate should be clear.
  • Looking at the categories with heavy services weighting, we see healthcare at 2.5-2.6% Y/Y (2.7% Aug), communication largely unchanged from August's -1.2%, recreation and culture at 1.4-1.5% Y/Y (1.2% Aug), education at 5.5-5.6% Y/Y (5.1% Aug), and restaurants and hotels around 6.2% (6.2% August). The mixed-weighting transport category should come in broadly around -1.7% Y/Y (-0.2% Aug), consistent with lower energy prices.
  • Food inflation appears to have seen little change in September, at around 2.1-2.2% Y/Y (2.1% Aug).
  • Core goods might have seen some slight disinflation again - we see clothing and footwear at around 2.3% Y/Y (2.6% Aug) and furnishings and household equipment at around -1.1% (-0.7% Aug). Supply chain disruptions seem to pose an upside risk here a couple months ago appear to not have made their way through to consumer prices (yet).