Euro area: Surprise downside in inflation numbers - Nomura

Analysts at Nomura note that the Eurozone’s flash euro area HICP inflation reading for September surprised the market on the downside with reading of 2.1% y-o-y (consensus: 2.1%, previous: 2.0%).

Key Quotes

“The rise in the headline rate was largely due to food and energy prices. But core inflation (ex food and energy) once again provided a pause for thought, as it rose more slowly.”

“The core rate slowed to 0.9% in September from 1.0% in August and was 0.2pp below expectations (consensus was for a 1.1% reading). However, some caution is required, as to two decimal places the error in the core inflation number was not that large. Indeed, the drop was more modest, 0.94% y-o-y from 0.96% in August. Industrial goods (ex food and energy) and services price inflation remained steady at 0.4% y-o-y and 1.3% y-o-y respectively.”

“While German inflation was stronger (up 0.3pp to 2.2%), other countries’ inflation was weaker – notably France. This is surprising in the context of increased inflation expectations within the EC’s monthly survey – though there tends to be a lag of some months before the price component of this consumer survey feeds into official data.”