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Slowing Pace On High-Inflation Items Disinflation Breadth in February

GERMAN DATA
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German final February HICP was unrevised from the flash readings as expected at +2.7% Y/Y (+3.1% Jan) and +0.6% M/M (-0.2% Jan). The final reading of CPI was also unrevised at +2.5% Y/Y (+2.9% Jan) and +0.4% M/M (+0.2% M/M). Core CPI printed at 3.4% M/M (+3.4% Jan). For the monthly headline CPI Y/Y, this represented the lowest value since June 2021.

  • The split amont the main December CPI components confirmed the flash reading. Goods prices printed at +1.8% Y/Y (vs +2.3% Jan), services at +3.4% Y/Y (+3.4% Jan).
  • Energy continued printing in deflationary territory, at -2.4% Y/Y (vs -2.8% Jan). Looking at the underlying drivers from the subcategories that weren't available in the flash reading: household energy prices decreased 3.6% Y/Y (-3.4% Jan), and fuels deflated 0.4% Y/Y (vs -2.0%
  • Food prices, which were one of the main inflation upside drivers in 2023, but disinflated towards the end of the year, saw that trend continue in February, coming in at +0.9% Y/Y (vs +3.8% Jan).
  • Within the core measure, specifically core goods, durable goods inflation increased and came in at +2.6% Y/Y (+2.3% Jan); in the details, developments were mixed, used car prices increased +8.7% Y/Y but mobile phones deflated by 5.2% Y/Y. Within services, notable items were rents at +2.2% Y/Y (+2.1% Jan), insurance at +9.8% Y/Y (+10.2% Jan) and package holidays at +9.0% Y/Y (vs +6.5% Jan).
  • MNI's HICP inflation breadth indicator (see chart below) shows disinflation progresssing for items which already saw low-to-medium inflation recently, as the percentage of categories printing below 2% increased to 39.1%, up from 33.6%. The percentage of categories printing at or above 6% also decresed, to 23.2%, down from 25.1% in December - the pace is slowing here, however.
  • The key piece to observe the coming inflation releases will continue to be services - after the stall in its yearly rate, service inflation is considered to be a main obstacle to an ECB rate cut.

MNI, Destatis


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German final February HICP was unrevised from the flash readings as expected at +2.7% Y/Y (+3.1% Jan) and +0.6% M/M (-0.2% Jan). The final reading of CPI was also unrevised at +2.5% Y/Y (+2.9% Jan) and +0.4% M/M (+0.2% M/M). Core CPI printed at 3.4% M/M (+3.4% Jan). For the monthly headline CPI Y/Y, this represented the lowest value since June 2021.

  • The split amont the main December CPI components confirmed the flash reading. Goods prices printed at +1.8% Y/Y (vs +2.3% Jan), services at +3.4% Y/Y (+3.4% Jan).
  • Energy continued printing in deflationary territory, at -2.4% Y/Y (vs -2.8% Jan). Looking at the underlying drivers from the subcategories that weren't available in the flash reading: household energy prices decreased 3.6% Y/Y (-3.4% Jan), and fuels deflated 0.4% Y/Y (vs -2.0%
  • Food prices, which were one of the main inflation upside drivers in 2023, but disinflated towards the end of the year, saw that trend continue in February, coming in at +0.9% Y/Y (vs +3.8% Jan).
  • Within the core measure, specifically core goods, durable goods inflation increased and came in at +2.6% Y/Y (+2.3% Jan); in the details, developments were mixed, used car prices increased +8.7% Y/Y but mobile phones deflated by 5.2% Y/Y. Within services, notable items were rents at +2.2% Y/Y (+2.1% Jan), insurance at +9.8% Y/Y (+10.2% Jan) and package holidays at +9.0% Y/Y (vs +6.5% Jan).
  • MNI's HICP inflation breadth indicator (see chart below) shows disinflation progresssing for items which already saw low-to-medium inflation recently, as the percentage of categories printing below 2% increased to 39.1%, up from 33.6%. The percentage of categories printing at or above 6% also decresed, to 23.2%, down from 25.1% in December - the pace is slowing here, however.
  • The key piece to observe the coming inflation releases will continue to be services - after the stall in its yearly rate, service inflation is considered to be a main obstacle to an ECB rate cut.

MNI, Destatis