MNI 5 THINGS: EU Nov HICP, Unemployment Likely Ease

By Jai Lakhani

     LONDON (MNI) - Preliminary HICP data published Friday will likely show

Eurozone inflation easing on the back of lower oil prices in November but

remaining above the ECB's target. A downward surprise in the flash German

inflation numbers, released earlier today, supports this outlook.

     Separately, Eurozone unemployment, which maintained a near ten-year low in

October, should see further downward momentum to 8.0% m/m from 8.1% previously.

     Ahead of the release, we outline five themes for attention.

     --Unlikely To See A HICP Surprise: Over the past 17 years, there have been

three upside and downside surprises each, with 11 correct calls by analysts. But

there has not been a surprise in either direction since 2009. The MNI median

forecast of 2.1% for HICP Y/Y is likely to be the outcome on Friday.

     --Germany And Spain Flash HICP Suggest Cooling Inflation At 2.1%: Germany,

France, Italy and Spain together account for 77.2% of the Eurozone-wide HICP

basket. Inflation in Germany and Spain (39.6% of the weighting) was 0.1% m/m and

-0.2% m/m respectively. Given these estimates, MNI calculations has Euro Area

HICP y/y at 2.14%. Consensus estimates for France and Italy also point to lower

November inflation readings.

     --Downward Energy Pressures Reverse Recent Trend: Energy prices have been

the key reason for Eurozone inflation remaining above the ECB's 'below but close

to 2%' target since June. However, oil prices have averaged EUR58.28/b in

November thus far, significantly down from an average of EUR70.55/b in October.

     --Goods HICP Been Key Driver Of Inflation In Recent Years: Goods inflation

has appeared to be the key driver of recent Euro Area inflation, as the rate of

increases in services has remained consistent and particularly close to the core

inflation y/y rate of 1.1% in October. This suggests the wedge between headline

and core is goods driven.

     --Recent Downside Surprises in Eurozone Unemployment: Eurozone unemployment

fell to 8.1% in September and remained at this rate in October - its lowest

since December 2008. The MNI median projection points to a further decline in

November (to 8.0%).

     Over the past eighteen years, there have been 4 downside surprises, 3 of

which have come in the last five years. Only 5 times have there been no

surprises, with 10 under-estimates. Whilst the data shows an average upside

surprise of 0.13pp, the last upside surprise was in 2011, suggesting there has

been a reversal in the previous trend.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

[TOPICS: M$E$$$,M$X$$$,M$XDS$]