MNI 5 THINGS: Core EZ Inflation Picks Up in Oct

--EMU Oct Flash HICP Released Weds, Seen Up 2.2% On Year vs 2.1% in Sep

By Jamie Satchi And Jai Lakhani

     LONDON (MNI) - Euro area inflation rose to 2.2% in October, up from 2.1% in

September, with price increases across energy and services offsetting moderation

in the food, alcohol and tobacco segments, data published by Eurostat Thursday

showed.

     We outline five themes for particular attention:

     --Welcome News for the ECB. The projected October rise kept the headline

HICP rate above the ECB's target of below, but close to 2%. It has remained

equal to or above 2.0% for the past five months. More pleasing still will be the

rise in underlying inflation, up 0.2pp to 1.1%, supporting the ECB's plans to

reduce monetary support over the coming year. Still, at this stage the data

breakdown remains light, so it's unclear what is exactly drove the higher core

rate - whether volatile services components (like package holidays) or the

so-called 'core-core' elements.

     --Energy Inflation Highest Since Nov 2011. Energy prices continued to

support the headline rate in October, rising by an estimated 10.6% y/y - the

fastest in just under seven years. Had it not have been for slowing food,

alcohol and tobacco (FAT) inflation, the HICP would have risen further. FAT

prices, which account for roughly one fifth of the basket, were up 2.2% in

October, down from 2.6% in September, the lowest since March.

     --Services Inflation Highest in 5 Months. Assisting the pickup in prices

was the services sector, which accounts for just shy of 44% of the consumer

basket (the biggest share of the major categories). Prices were estimated to

have risen by 1.5% in October, the highest outturn since May, which was boosted

by Easter and when prices were up by 1.6%.

     --Unemployment Steady. The euro area jobless rate held firm at 8.1% in

September, the lowest recorded since November 2008. Across the 'Big Four', the

level of unemployment moderated in Spain (down 0.1pp to 14.9%), rose in Italy

(up 0.3pp to 10.1%) and remained unchanged in Germany (3.4%) and France (9.3%).

     --Upside Data Surprises: Unemployment bucked a trend of analysts

over-estimating the reading in the last three successive Octobers, with an

unemployment rate of 8.1% surprising to the upside by 0.1pp. HICP also surprised

to the upside by 0.1pp with an MNI median of 2.1%.

--MNI London Bureau; +44208-865-3829; email: Jason.Webb@marketnews.com

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