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May Flash Inflation Adding to  Evidence of Lower EZ Core CPI

MNI (London)

FRANCE MAY HICP -0.1% M/M (FCST +0.3%); APR +0.7% Y/Y

FRANCE MAY HICP +6.0% Y/Y (FCST +6.4%); APR +6.9% Y/Y

  • French inflation surprised to the downside in the May flash data, after the soft print from Spain yesterday. HICP fell -0.1% m/m (vs +0.3% expected), whilst cooling by 0.9pp to +6.0% y/y (vs +6.4% expected).
  • The annualised decline in inflation was fagged as being relatively broad-based, due to a deceleration in energy, food, manufactured goods and services prices.
  • Evidence for a lower core inflation print in the eurozone aggregate data (due Thurs) is materialising.
  • The deceleration in French manufactured goods by 0.5pp to +4.1% y/y and in services by 0.2pp to +3.0% y/y implies a decline in French core CPI is likely.
  • This is in addition to Spanish core inflation (non-harmonised) dipping to +6.1% y/y (down 0.5pp) and NRW (accounting for 21.1% of German print) core CPI decelerating a similar 0.5pp to +5.0% y/y.
  • At present, consensus expects the euro area core index to edge down a mere 0.1 pp to +5.5% y/y (only 0.2pp below the euro-era high).

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