German HICP Preview (Nov 28): Headline and Core To Edge Down Further?
Germany’s disinflation process hit a further and more-than-expected hurdle in September, as the HICP measure rose 0.3 ppt for a second successive month, thereby even more clearly up from July’s 1.8% y/y, that having been a 10-mth low. But a notch of this rise was reversed in the October numbers to 2.3% (Figure 1) and with more falls in the headline and core to come into 2026. Indeed, we see the headline down to 2.2% in November in spite of energy base effects and a m/m rise in petrol costs but with services prices this time contributing slightly to the downside – refreshing a softening trend for the latter. If so, the result would see the CPI core back down a notch to 2.3%. Regardless, as we have suggested before, core adjusted data are telling a more reassuring tale. Even so, there is a wide range of estimates for this November numbers with the consensus actually seeing a notch rise!
Figure 1: German HICP Inflation to Continue Downtrend?
Source: German Federal Stats Office, CE
The German August to October data were bolstered by energy prices – mainly due to fuel prices having dipped more this time last year than this year. However, such base effects should now start to unwind and a fresh fall should resume in Q4, even given an actual rise in fuel costs through into November! The question is how aberrant is the seemingly vacation induced rise in services inflation that was evident in the September CPI figures – this all the more puzzling given survey and wage data suggesting a still weakening trend
Regardless, perhaps continued disinflation news is evident in adjusted m/m data which have shown some fresh downtick in core rates even though this does not seem to have proceeded discernibly further in the August numbers. But, we think the November HICP details will continue this with a core reading eventually emerging in the final numbers of between 0.1% and 0.2% in adjusted m/m terms (Figure 2).
Figure 2: German Adjusted Core Rate Drop Already at Target?
Source: German Federal Stats Office, CE, % chg m/m seasonally adjusted and smoothed