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MNI Eurozone Inflation Preview – November 2023

MNI Eurozone Inflation Preview – November 2023

MNI Eurozone Inflation Preview – November 2023

EXECUTIVE SUMMARY

The Easy Part Is Ending, The Last Mile Begins

The November round of monthly flash Eurozone inflation data begins on Wednesday Nov 29 with Spain and Germany reporting, and the French, Italian, and Eurozone-wide figures printing on Thursday Nov 30.

  • After seeing disinflationary progress over the past several reports, including October delivering the first Y/Y headline HICP print below 3% since August 2021, the ECB will be closely watching this month's price dynamics ahead of its December meeting.
  • To be sure, November HICP is expected to see further declines, to 2.7% Y/Y (2.9% prior) for headline and 3.9% Y/Y core (4.2% prior), which would only reinforce the overwhelming market conviction that ECB rates have reached their peak.
  • But beyond the disinflationary readings of the past few months, the "easy part" in the disinflationary process is arguably coming to an end, with the ECB increasingly eyeing the "last mile" of bringing inflation down to 2% over the forecast horizon.
  • In this regard the November report should be regarded in two ways: “mechanically”, in the sense that base, weighting and seasonal effects will be contributing heavily to disinflation and some will reverse higher in the next few months; and two – structurally, with further downward momentum in the core components likely to be necessary for ECB policymakers to have comfort that broader progress will continue into 2024.
  • Our preview includes analysis of price categories to watch, assessments of underlying inflation trends, outlooks for the French, German, Italian, and Spanish national inflation prints, and sell-side analyst previews.

FOR FULL PDF ANALYSIS:

Nov2023EZCPIPreview1.pdf





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