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Lower HICP Item Disinflation Showing Signs Of Stalling At/Above 2%

GERMAN DATA
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German final March HICP was unrevised from the flash readings at +2.3% Y/Y (+2.7% Feb) and +0.6% M/M (+0.6% Feb). The final reading of CPI was also unrevised at +2.2% Y/Y (+2.5% Feb) and +0.4% M/M (+0.4% Feb). Core CPI printed at +3.3% Y/Y (+3.4% Feb). For the monthly headline CPI Y/Y, this represented the lowest value since April 2021.

  • The final major CPI component readings confirmed the flash estimates: goods prices printed at +1.0% Y/Y (vs +1.8% Feb), services at +3.7% Y/Y (+3.4% Feb).
  • Upside drivers to core compared to February included transportation at +2.0% Y/Y (vs +1.6% Feb), education at +4.8% (vs +4.5%), restaurants and hotels at +6.4% (vs +6.2%), and insurance at +11.0% (a multi-decade high, vs 9.8%). Disinflation could be observed in the recreation and culture category, at +2.0% Y/Y (vs +2.7% Feb).
  • On the headline front, energy continued printing in deflationary territory, at -2.7% Y/Y (-2.4% Feb). Looking at the subcategories that weren't available in the flash reading: household energy prices came in at -4.6% Y/Y (-3.6% Feb), and petrol at +0.3% (-0.4%).
  • Food prices, which were one of the main inflation upside drivers in 2023 but cooled towards the end of the year, was in deflation for the first time since December 2014, coming in at -0.7% Y/Y (+0.9% Feb).
  • MNI's HICP inflation breadth tracker (see chart below) shows disinflation progressing on higher-inflation items, with the percentage of categories printing at or above 6% Y/Y falling to 18.8% from 23.2% in February. However, disinflation is stalling for lower-inflation items, with the percentage of categories printing below 2% Y/Y sliding to 38.7%, down from 39.1% in Feb.
  • The key element to observe in the coming inflation releases will continue to be services as price growth there remains sticky.
  • However, ECB President Lagarde stressed in the April press conference in response to a question about persistently elevated services prices that in deciding whether to make rate cuts, the Governing Council will not be "going to wait until everything goes back to 2%".

MNI, Destatis

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German final March HICP was unrevised from the flash readings at +2.3% Y/Y (+2.7% Feb) and +0.6% M/M (+0.6% Feb). The final reading of CPI was also unrevised at +2.2% Y/Y (+2.5% Feb) and +0.4% M/M (+0.4% Feb). Core CPI printed at +3.3% Y/Y (+3.4% Feb). For the monthly headline CPI Y/Y, this represented the lowest value since April 2021.

  • The final major CPI component readings confirmed the flash estimates: goods prices printed at +1.0% Y/Y (vs +1.8% Feb), services at +3.7% Y/Y (+3.4% Feb).
  • Upside drivers to core compared to February included transportation at +2.0% Y/Y (vs +1.6% Feb), education at +4.8% (vs +4.5%), restaurants and hotels at +6.4% (vs +6.2%), and insurance at +11.0% (a multi-decade high, vs 9.8%). Disinflation could be observed in the recreation and culture category, at +2.0% Y/Y (vs +2.7% Feb).
  • On the headline front, energy continued printing in deflationary territory, at -2.7% Y/Y (-2.4% Feb). Looking at the subcategories that weren't available in the flash reading: household energy prices came in at -4.6% Y/Y (-3.6% Feb), and petrol at +0.3% (-0.4%).
  • Food prices, which were one of the main inflation upside drivers in 2023 but cooled towards the end of the year, was in deflation for the first time since December 2014, coming in at -0.7% Y/Y (+0.9% Feb).
  • MNI's HICP inflation breadth tracker (see chart below) shows disinflation progressing on higher-inflation items, with the percentage of categories printing at or above 6% Y/Y falling to 18.8% from 23.2% in February. However, disinflation is stalling for lower-inflation items, with the percentage of categories printing below 2% Y/Y sliding to 38.7%, down from 39.1% in Feb.
  • The key element to observe in the coming inflation releases will continue to be services as price growth there remains sticky.
  • However, ECB President Lagarde stressed in the April press conference in response to a question about persistently elevated services prices that in deciding whether to make rate cuts, the Governing Council will not be "going to wait until everything goes back to 2%".

MNI, Destatis