EUROPEAN INFLATION
Looking at the individual subcategories and their respective contributions to Swiss August headline CPI affirms the view that the headline drop was mainly imports (energy)-driven. However, also non-rental services pressures overall declined a little again. That alone should facilitate SNB cuts on the margin, while the SNB's reaction function to falling energy inflation seems a bit more opaque to us.
- Energy and fuels inflation dropped to +2.5% Y/Y from +6.2% prior. This broadly netted out the housing rental inflation increase - the housing and energy category now overall contributes 0.956pp, almost unchanged from July.
- Contributions of the services-heavy categories were more mixed and overall remained relatively stable: Recreation contributed 0.247pp, 0.012pp more than July; hospitality at 0.170pp, 0.025pp less than in July; education at 0.006pp, 0.009pp less than in July; healthcare at -0.109pp, 0.018pp less than in July, and communication contributed 0.012pp, 0.006pp more than in July.
- The mixed-weighting (contains both goods and services) transport category contributed -0.080pp, 0.101pp less than in July.
- Overall contribution from services ex-rents continued to decline in August (0.615pp contr, 0.079pp less than in July, and 0.166pp less than in June, when they reached a 14-month high).
- Changes in contribution of categories associated mainly with core goods (clothing, household items) were slightly negative, but they appear to play a relatively minor role in the SNB's inflationary pressures assessment at the moment.
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