ITALY DATA: Summer Sales and Regulated Energy Prices Key Drivers In July

Italian July flash HICP printed notably above consensus at 1.7% Y/Y (vs 1.2% cons, 0.9% prior) and -0.8% M/M (vs -1.2% cons, 0.2% prior).

• CPI saw a smaller upward surprise, to 1.3% Y/Y (vs 1.1% cons, 0.8% prior) and 0.5% M/M (vs 0.3% cons, 0.1% prior). 
• The increase in headline rates came as regulated electricity prices ended for most consumers in Italy, pushing up regulated energy CPI by 5.5% M/M and 11.3% Y/Y (vs 3.5% prior). This dynamic was expected by Barclays coming into the release.
• Annual energy HICP nonetheless remained in deflation at -4/0% Y/Y, but this followed -8.6% in June.
• The 0.4pp difference between HICP and CPI inflation in July is partially because summer sales are not accounted for in the CPI metric, but are so in HICP.
• For example, the clothing and footwear HICP fell 16.9% M/M in July (vs -0.1% in CPI). However, in July 2023, this component fell 19.8% M/M, meaning annual clothing and footwear HICP inflation rose 4.8% Y/Y (vs 1.1% in June)
• Looking specifically at HICP: Inflation excluding energy, food, alcohol and tobacco rose 2.6% Y/Y (vs 2.1% prior), with non-energy industrial goods rising 1.2% Y/Y (vs 0.5% prior, driven by the clothing component as noted above) and services remaining sticky at 3.2% (vs 3.1% prior).
• Food HICP inflation meanwhile softened to 1.3% Y/Y (vs 1.7% prior).