Published: 2024-02-29T13:13:39.000Z
German Data Review: Inflation Drop Continues But Still Resilient Services?
Senior Economist Western Europe , UK, Eurozone
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Base effects continue to distort the German HICP/CPI readings, but the January data came in a notch below expectations, and reversed half of the surge in the y/y rate seen in December. And February data continued the downtrend, as the HICP rate fell from 3.1% to 2.7%, but with no further drop in the CPI core.
Instead, the drop was purely based around lower food inflation while energy prices in February moved the other way while despite favourable base effects, there was seemingly continued momentum in services inflation, very probably a result of higher VAT being levied on restaurant meals in January still being passed on to consumers. Regardless, the disinflation backdrop is underlined by what may be still-soft core seasonally adjusted trend which may be running just around 0.1% in m/m terms and where this very creaky waning price momentum should see headline HICP below 2% by May, albeit with some swings possibly accentuated by the early Easter this year.
Figure 1: CPI Headline Drops Further?
Source: German Federal Stats Office