Anna Titareva, Research Analyst at Nomura, notes that the German preliminary November CPI rose 0.1% m-o-m and 0.8% y-o-y, in line with Nomura’s and consensus expectations.

Key Quotes

“German annual HICP inflation was unchanged from the previous month at 0.7% y-o-y in November, marginally below our and consensus expectations of 0.8% y-o-y.”

“The main downside surprise relative to our expectations came from the volatile tourismrelated package holiday component, which was unchanged relative to the previous month. This unusually weak print for November print shaved off around 22bp relative to our expectations. However, a rebound in food and beverages prices, worth around +13bp on the headline, has somewhat offset the negative impact from package holidays. Elsewhere, a monthly decline in the energy prices turned out to be larger than we expected, but was outweighed by a less sharp monthly decline in clothing prices. Overall, we estimate that German core inflation ticked down to 1.0% y-o-y in November after staying at 1.1% y-o-y for two consecutive months.” 

“Our aggregation of the German state CPI indicates that energy prices declined in November following two consecutive monthly increases (fuels -2.4% m-o-m; heating oil -5.4% m-o-m), negatively contributing to the November headline HICP growth rate.” 

“Taking into account that the main drag on the November German HICP came from the country-specific factor related to large seasonal swings in the package holiday component, while food prices showed a strong monthly increase, we now expect stronger food prices to occur across the region. As a result, following an upside surprise in the Spanish November HICP (0.5% y-o-y vs our expectations of 0.3% y-o-y) and our expectations for stronger food prices, we have revised up our forecast for November euro area HICP inflation to 0.6% y-o-y (0.56%). We also expect euro area core inflation to remain at 0.8% y-o-y in November.”