Headline annual inflation in the Eurozone cooled for the third straight month in January, but the core rate remained at its all-time high, suggesting more difficult talks among policymakers at the European Central Bank ahead of its next rate decision on Thursday.
Preliminary data from the EU statistics office Eurostat showed a decline in inflation last month to 8.5%, a mark significantly lower than economists’ expectations of 9.0 and the 9.2% reading in December.
But the good news was muddled by the announcement that core rate held at the record 5.2% set in the final month of 2022; analysts had expected a decline to 5.1%.
Official German data was unavailable for this month's report, as seen here in the Eurostat press release.
And some observers have also questioned the validity of Wednesday’s report as EU statisticians were forced to approximate the inflation rate for Germany, the currency area’s biggest economy.
“Data for Germany for January 2023 were not available in time for publication due to technical data processing issues in Germany,” Eurostat said. “Therefore, the euro area HICP has been calculated using Eurostat estimates.”
As Jack Allen-Reynolds, senior Europe economist at Capital Economics, noted: “January’s bigger-than-expected decline in headline euro-zone inflation should be taken with a big pinch of salt.”
Because the data for Germany had to be projected, it is “therefore likely to be unreliable,” he warned.
Danske Bank Director Piet Haines Christiansen said in a tweet that while caution about the January inflation numbers is warranted, a 50-basis point rate hike this month from the ECB and hawkish messaging for 50bp more in March “should also be a done deal. Inflation is way too high (and sticky) for [the] ECB to accept.”
Mixed messages from Romance countries
Italy, the Eurozone’s third-largest economy, said Wednesday that its preliminary EU-harmonised annual inflation rate dropped to 10.9%, which outpaced the estimate of 10.7% but fell from 12.3% in December.
Higher inflation in other Romance countries had stoked concerns among analysts, with some cautioning that those increases could possibly raise the Eurozone headline rate this month, fears that proved to be unfounded.
France, the Eurozone’s second-largest economy, announced Tuesday in a preliminary report that its EU-harmonised rate increased to 7.0% versus the market estimate of 6.9% and last month’s reading of 6.7%.
Spain, the euro area’s fourth-largest economy, said Monday that its initial estimate for EU-harmonised inflation rose to 5.8% to exceed December’s 5.5%.
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- Fall in headline rate countered by sticky core number
- Lack of official German data irks analysts
- Latest data could fuel ECB rate cut debate
By Eric Culp, European Editor
LiveSquawk News
@EricCulpLS
1 February 2023 | 12:00 GMT
Headline annual inflation in the Eurozone cooled for the third straight month in January, but the core rate remained at its all-time high, suggesting more difficult talks among policymakers at the European Central Bank ahead of its next rate decision on Thursday.
Preliminary data from the EU statistics office Eurostat showed a decline in inflation last month to 8.5%, a mark significantly lower than economists’ expectations of 9.0 and the 9.2% reading in December.
But the good news was muddled by the announcement that core rate held at the record 5.2% set in the final month of 2022; analysts had expected a decline to 5.1%.
And some observers have also questioned the validity of Wednesday’s report as EU statisticians were forced to approximate the inflation rate for Germany, the currency area’s biggest economy.
“Data for Germany for January 2023 were not available in time for publication due to technical data processing issues in Germany,” Eurostat said. “Therefore, the euro area HICP has been calculated using Eurostat estimates.”
As Jack Allen-Reynolds, senior Europe economist at Capital Economics, noted: “January’s bigger-than-expected decline in headline euro-zone inflation should be taken with a big pinch of salt.”
Because the data for Germany had to be projected, it is “therefore likely to be unreliable,” he warned.
Danske Bank Director Piet Haines Christiansen said in a tweet that while caution about the January inflation numbers is warranted, a 50-basis point rate hike this month from the ECB and hawkish messaging for 50bp more in March “should also be a done deal. Inflation is way too high (and sticky) for [the] ECB to accept.”
Mixed messages from Romance countries
Italy, the Eurozone’s third-largest economy, said Wednesday that its preliminary EU-harmonised annual inflation rate dropped to 10.9%, which outpaced the estimate of 10.7% but fell from 12.3% in December.
Higher inflation in other Romance countries had stoked concerns among analysts, with some cautioning that those increases could possibly raise the Eurozone headline rate this month, fears that proved to be unfounded.
France, the Eurozone’s second-largest economy, announced Tuesday in a preliminary report that its EU-harmonised rate increased to 7.0% versus the market estimate of 6.9% and last month’s reading of 6.7%.
Spain, the euro area’s fourth-largest economy, said Monday that its initial estimate for EU-harmonised inflation rose to 5.8% to exceed December’s 5.5%.