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Modest Disinflation Expected In January Amid Energy VAT Increases

SPAIN DATA
The January Eurozone inflation round begins with Spain this morning at 0800GMT/0900CET. Although the flash release contains little in the way of details, we preview today's print in the below. We will release our full Eurozone Inflation preview this morning, shortly after the Spanish print is released. Spain had an 11% weight in the overall EZ basket in 2023.
  • HICP consensus (bbg): 3.0% Y/Y (3.3% prior) / -0.6% M/M (0.0% prior)
  • CPI consensus (bbg): 3.0% Y/Y (3.1% prior) / -0.2% M/M (0.0% prior)
  • Core CPI consensus (bbg): 3.3% Y/Y (vs 3.8% prior)
The headline rate is expected to be primarily driven by increases in the VAT on electricity and gas.
  • VAT on both gas and electricity has risen to 10% (vs 5% prior), and analysts have noted additional changes to taxes on electricity and electricity generation.
    • Morgan Stanley estimate the total impact of the above changes to be around +26bp to headline CPI.
    • Barclays forecast a +9.0% M/M change in electricity HICP and a +4.8% M/M change in gas HICP.
    • Nomura look for a smaller increase in electricity HICP (+1.0% M/M) but a +6.5% M/M rise in gas HICP.
  • Core components are expected to continue disinflation, as in the other major Eurozone countries.
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