EUROPEAN INFLATION: ITALY: Moderation In Core Inflation Masks Services Uptick

Italian August flash HICP headline inflation eased to 1.3% Y/Y, in line with consensus and down from 1.6% prior. Core HICP (ex-food, energy, alcohol and tobacco) inflation also moderated a tenth to 2.3% Y/Y (vs 2.4% prior), though this was driven by renewed disinflation in core goods, with services accelerating for the second consecutive month.

• The end of the annual summer sales period allowed core goods inflation to more than reverse July’s acceleration, falling to 0.3% Y/Y (vs 0.8% in July, 0.5% in June). In particular, clothing and footwear HICP fell 5.2% M/M, rising 1.1% Y/Y (vs 3.2% prior).
• The acceleration of services inflation to 3.4% Y/Y (vs 3.2% prior) mirrors an increase in expected prices in the European Commission’s business survey. The restaurant and hotel, recreation and culture and health components all registered Y/Y upticks.
• Energy deflation continued in August, as expected by analysts coming into the release. Energy inflation was -6.2% Y/Y (vs -4.0% prior).
• The food component accelerated a touch to 1.4% Y/Y (vs 1.2% prior).