MNI Eurozone Inflation Insight - December 2023

EXECUTIVE SUMMARY

Eurozone flash December HICP accelerated in line with expectations but printed slightly lower than the 3.0% Y/Y consensus entering the monthly inflation round, at +2.92% Y/Y (vs +2.40% prior). Conversely, core inflation decelerated +3.42% Y/Y (vs 3.56% prior) - in line with expectations.

• Looking at the core categories, services were steady at 4.0% Y/Y (and +0.7% M/M) while non-energy industrial goods disinflated to 2.5% Y/Y (vs 2.9% prior). These dynamics were widely expected by analysts.
• Seasonally adjusted data published by the ECB show a small rebound in sequential core inflation in December to +0.22% M/M (vs -0.09% prior).
• The upward energy base effect - which pushed up headline rates in Germany and France - meant that annual energy inflation ticked up to -6.7% Y/Y (vs -11.5% prior). However, on a monthly basis, prices still fell -1.5% M/M (NSA).
• At a country level, annual HICP inflation accelerated in 9 countries – likely due to aforementioned energy base effects. On a monthly basis, 9 countries saw M/M NSA deflation (down from 16 in November). 8 countries printed Y/Y rates below the ECB's 2% target.
• Even with the December data printing largely in line with forecasts and showing encouraging signs from an underlying momentum standpoint (which we elaborate upon in our report), markets were unwilling to ramp up ECB rate cut pricing.
• Our review of December's preliminary Eurozone inflation data includes breakdowns and analysis of the national inflation prints, and some sell-side reactions.

FOR FULL PDF ANALYSIS:

Dec2023EZCPIReview.pdf