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Moderation In Core Momentum In June, But Services Remain Elevated

EUROPEAN INFLATION
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Eurozone core inflation momentum moderated a little in June, rising 3.10% on a 3m/3m annualised basis using the ECB’s seasonally adjusted data (vs 3.42% prior). However, underlying momentum in services remains too high for comfort, underscoring commentary from ECB Chief Economist Lane this morning.

  • Both services (4.92% vs 5.39% prior) and core goods (-0.11% vs 0.05% prior) momentum eased in June, though the former remains at elevated levels after seemingly troughing at 2.46% in January this year.
  • This morning, ECB Chief Economist Lane noted that the June data did not answer the ECB’s questions on services inflation.
  • The sticky 4.1% NSA Y/Y reading alongside the above momentum series with SA data seemingly justifies this stance.
  • On a sequential SA basis, services prices rose 0.27% M/M, a step down from May’s 0.58%. Core prices rose 0.22% (vs 0.36% prior), while core goods grew 0.11% (vs -0.01% prior).
  • We note that Eurozone services HICP has risen by 1.1% M/M NSA on average since 2016 – more than any other month. As such, the bar for a similar increase in sequential SA services inflation next month is quite high.

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Eurozone core inflation momentum moderated a little in June, rising 3.10% on a 3m/3m annualised basis using the ECB’s seasonally adjusted data (vs 3.42% prior). However, underlying momentum in services remains too high for comfort, underscoring commentary from ECB Chief Economist Lane this morning.

  • Both services (4.92% vs 5.39% prior) and core goods (-0.11% vs 0.05% prior) momentum eased in June, though the former remains at elevated levels after seemingly troughing at 2.46% in January this year.
  • This morning, ECB Chief Economist Lane noted that the June data did not answer the ECB’s questions on services inflation.
  • The sticky 4.1% NSA Y/Y reading alongside the above momentum series with SA data seemingly justifies this stance.
  • On a sequential SA basis, services prices rose 0.27% M/M, a step down from May’s 0.58%. Core prices rose 0.22% (vs 0.36% prior), while core goods grew 0.11% (vs -0.01% prior).
  • We note that Eurozone services HICP has risen by 1.1% M/M NSA on average since 2016 – more than any other month. As such, the bar for a similar increase in sequential SA services inflation next month is quite high.