Be careful numbers on inflation in the euro area in general and in Italy specifically, just announced today, Thursday 1st February.
In Italy, Istat has announced that, according to its preliminary estimates, in January the national consumer price index (CPI) marked an increase of 0.3% on a monthly basis and 0.8% on an annual basis, accelerating compared to +0.6% in the previous month.
As regards the data relating to inflation in the euro area, it emerged that in the month of January the CPI achieved an increase on an annual basis of +2.8%, in line with expectations, slightly below the +2.9% of December.
But watch outcore inflation – or inflation stripped of the more volatile components represented by the prices of food and energy goods – which rose in general in the euro area by 3.3% on an annual basis, slightly down compared to +3.4% in December, but in addition to analysts’ estimates, who had aimed for a further weakening of the growth rate, to +3.2%.
Christine Lagarde’s ECB will certainly not have liked it. The data confirm, in fact, that inflationary pressures remain persistent in the bloc, well beyond the wishes of the European Central Bank, which has set the medium-term inflation target at 2%.
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The crucial data for the ECB. And today we’re talking about rate cuts
These numbers, together with those released a few days ago on the GDP trend of the entire euro area and of the individual countries of the bloc, will provide, together with other incoming indicators, the basis on which the ECB’s next monetary policy moves will be decided: precisely that Bce capinata by Christine Lagarde, which has many hesitations about taking the big step desired by various governments and citizens of the Eurozone: that is, cut rates.
Meanwhile today, it was the bankers of the European Central Bank who spoke Mario Centeno who, on the cuts dossier, said that, “if the inflation trajectory is confirmed, the next step will be to cut rates”.
The point, however, is the contrasted macro picture of the Eurozonealready highlighted by euro GDP data published this week.
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It must be said that already a few days ago Centeno, member of the Governing Council of the ECB, he had said he hoped for a cut in euro area rates, in the absence of any inflationary shocks.
“There is a lot of evidence – he stated – of the fact that inflation is falling steadily” compared to the medium-term objective of 2%.
The banker had illustrated two hypotheses:
“We can react later and more strongly, or earlier and more gradually. I am completely in favor of scenarios that involve gradual interventions, since we must give our economic agents time to adapt to our decisions.”
In that speech, Centeno had called for continuous and sustained rate cuts, considering gradual reductions of 25 basis points “a good parameter” for taking action.
Inflation in Italy, Istat: index accelerates in January, +0.8% y/y
As regards inflation in Italy, today Istat announced that, according to preliminary estimates, in the month of January 2024 the national consumer price index for the entire community (NIC), including tobacco, it rose by 0.3% on a monthly basis and by 0.8% on an annual basis (from +0.6% in the previous month).
Inflation accelerates on a trend basis: Istat explains why
Istat explained the acceleration of inflation on a trend basis with the increase in prices of some factors, to be precise:
The increase in prices of transport-related services (from +3.7% to +4.3%). The increase in unprocessed food goods (from +7.0% to +7.5%).
Detected a decrease in the decline in prices of regulated energy goods (from -41.6% to -21.4%) and, also, the attenuation of the increase in prices of housing-related services (from +4.2% to +2.9%) and durable goods (from +1.5% to +0.8%).
With regard to Italy’s core inflationor also “underlying inflation”i.e. that calculated net of energy and fresh food, Istat has indicated a deceleration in the growth rate from +3,1% a +2,8%, while that net of energy goods only has weakened since +3,4% a +3,1%.
In general, the trend dynamics of goods prices slowed down (from -1.5% to -0.8%), while that of services marked a deceleration, while remaining positive (from +3.4% to +2.9%), resulting in a decrease in the inflationary differential between the services and goods sectors (+3.7 percentage points, from +4.9 in December).
The prices of food, household and personal care goods have risen slightly on a trend basis since +5,3% a +5,4%while those of high purchase frequency products made an about-face (from +4.4% in December to +3.6%).
The factors that supported the economic increase
Istat then explained the cyclical increase in inflation especially with:
The growth in prices of unprocessed food goods (+1.1%). The growth of processed food goods (+1.0%). The increase in prices of housing-related services (+0.4%). The rise in unregulated energy goods and other goods (+0.3% both).
In particular, “the effects of these increases were only partially offset by the decrease in the prices of transport-related services (-1.2%) and by the slight drop in the prices of regulated energy goods (-0.1%)”.
Istat announces acquired inflation for 2024
The result of these dynamics was that the inflation acquired for 2024 is equal to +0.3% for the general index and +0.9% for the underlying component.
Furthermore, based on preliminary estimates, the harmonized index of consumer prices (HICP) fell by 1.1% on a monthly basis, due to the start of the winter clothing and footwear sales which the NIC index does not take into account, rising by 0.9% on an annual basis (up from +0.5% in December).
Finally, Istat has summarized and commented what emerged from the data relating to inflation in Italy:
“In January, according to preliminary estimates, inflation shows a slight rebound, rising to 0.8% from 0.6% in December 2023. The moderate acceleration in the pace of price growth reflects the trend in energy prices regulated, whose decline on a trend basis was, in January, attenuated due to the statistical effect due to the unfavorable comparison with January 2023. A contribution to the rise in inflation is also due to the continuing tensions on the prices of unprocessed food goods, whose effects are also manifested in the acceleration of the so-called ‘shopping cart’ (+5.4%). Finally, underlying inflation stood at +2.8% in January (from +3.1% in the previous month)”.
Euro inflation +2.8% on an annual basis, core inflation over +3%
As regards the overall inflation figure in the Eurozone, which is what determines the decisions of Lagarde’s ECB, Eurostat announced today with the publication of preliminary estimates to expect an increase in the CPI on an annual basis of +2.8% in January 2024, down from +2.9% in December.
Highlighted above all the prices of food, alcohol and tobacco, expected to jump by 5.7%, however slowing down compared to +6.1% in December.
They also affected the increase in inflation the prices of the services (+4%, stable compared to December), the prices of non-energy industrial goods (+2%, compared to +2.5% in December).
The prices of energy goods instead they fell by 6.3%, compared to -6.7% in December.
The hope of the markets, noted an article in the Financial Times, is that the ECB decides to cut rates above all, rather than with the publication of these numbers, after the data already released relating to theinflation in France and Germanywhose economies have confirmed themselves, among other things, as the weak links of the euro area, as confirmed by the data relating to their respective GDPs.
The data arrived yesterday from Germany’s macroeconomic front highlighted, in particular, that, in the month of January, the consumer price index rose 2.9% year-on-year, a sharp decline compared to 3.7% in December.
The pace of growth, he confirmed the German National Statistical Institute Destatis, it was the slowest since June 2021.