MNI Eurozone Inflation Insight - January 2024

EXECUTIVE SUMMARY

Core Goods Disinflate Further, But Services Progress Stalls

Eurozone flash January HICP decelerated as expected versus December’s largely base-induced uptick, but printed slightly above the 2.7% Y/Y consensus at an unrounded 2.752% (vs 2.929% prior). Core inflation was an unrounded 3.275% Y/Y (vs 3.426% prior) – slightly above expectations of 3.2% but the 6th consecutive fall.

• The main core categories mirrored December’s results, with services at 4.0% Y/Y for the 3rd month in a row (and -0.1% M/M NSA) while non-energy industrial goods disinflated further at 2.0% Y/Y (vs 2.5% prior).
• Analysts were slightly surprised by the stickiness in services inflation, though there was some debate as to its significance. Some identified one-off factors including the increase in German restaurant VAT as the reason for sustained strength, but others cautioned that it appears services inflation overall is stabilising at a relatively high rate.
• Medium-term market-implied ECB rate cut expectations ended up slightly reduced over the 3 days of Eurozone inflation releases (Jan 30, Jan 31, Feb 1), with markets currently expecting 140bps of cuts through 2024 versus 145bp at the close on Jan 29.
• Our review of January's preliminary Eurozone inflation data includes breakdowns and analysis of the national inflation prints, and some sell-side reactions.

FOR FULL PDF ANALYSIS:

Jan2024EZCPIReview.pdf