Eurozone flash CPI: Risks are skewed towards a weaker print – TDS

Analysts at TDS provide an in-depth preview on today’s Eurozone flash CPI estimate due to be reported at 1000GMT.

Key Quotes:

“We look for Eurozone HICP to slip from 1.4% to 1.1% y/y in January, below market consensus of 1.2%. The risks are skewed towards a weaker print given German HICP yesterday weakened more than expected from 1.6% to 1.4% y/y. 

Underlying that forecast is an unchanged core CPI print of 0.9% y/y, while markets are looking for it to edge a notch higher to 1.0%. (Although with a forecast to two decimal places of 0.94%, it’s admittedly a close call.)

The main source of drag to the headline print comes from base effects, with food prices gaining less ground than last year when poor crop output boosted produce prices, and as well as energy prices, where this year’s m/m rise in fuel prices should be quite a bit stronger than last year’s.

Going forward, we’re looking for core CPI to remain around the 1.0% level through at least the first half of this year, still failing to show the sustained upward trend that the ECB is looking for. So we continue to believe that the ECB will maintain its forward guidance language for longer than markets are expecting.”