July Flash Sees HICP Jump to 8.5%

• Following a slew of German state CPI data this morning, the flash national German print edged down 0.1pp to +7.5% y/y for and accelerated by 0.8pp to +0.9% m/m in July.
• This is was in line with the MNI forecast (based on 88.1% of state data), yet above the consensus expectations.
• The HICP index saw a substantial upside surprise, accelerating by 0.9pp to +0.8% m/m and by 0.3pp to +8.5% y/y.
• Energy prices did ease again for the second consecutive month, down 2.3pp at +35.7% y/y in July. This was largely cancelled out by the boost in food prices, up 2.1pp at +14.8% y/y. The July core CPI is due with the final release on August 10.
• The German Statistics Office highlighted that the effects of both the fuel discount and 9-euro transport ticket will be included in this data.
• This follows yesterday's fresh historic low for the GfK consumer sentiment index in August. The accelerated costs of living continue to see confidence plunge, exacerbated by persistent supply chain disruptions worsened by the Ukraine war and concerns regarding the security of gas supplies.
• As this data feeds into the Eurozone aggregate and ECB considerations, the probability of the ECB frontloading hikes is increasing. 50bp is again on the table for September (markets currently price 46bp).
• French, Spanish and Italian CPI prints are due tomorrow morning. If these see substantial upside surprises, expectations for a larger hike could materialise.

Source: MNI / Bloomberg