Eurozone: Higher core inflation in January – Nordea Markets

Anders Svendsen, analyst at Nordea Markets, points out that the Eurozone’s core inflation rose to 1.1% y/y in January from 1.0% y/y in December, while headline inflation dropped to 1.4% y/y from 1.6% y/y in line with expectations due to lower energy prices.

Key Quotes

“The higher core inflation was driven by higher services prices. Services prices rose to 1.6% y/y in January from 1.3% y/y in December, while core goods prices dropped to 0.3% y/y in January from 0.4% y/y.”

“We believe core inflation will rise gradually during the year, but mostly in the second half. Supercore inflation – the part of core inflation that is responsive to the business cycle – picked up already in 2018 but will most likely rise somewhat faster this year in a lagged response to much higher wage growth in 2018. So far, however, the rest of core has surprised to the downside and kept the total core inflation at a sideways trend around 1.0% y/y.”