We see clear downside risks to the consensus forecasts for November inflation in Europe due to small seasonal expectations for price cuts in various seasonally dependent cost categories.

In our preview, we will assess the scope for surprises in the core countries and on the aggregate Euro area level.

Seasonal considerations: Not enough seasonality is penciled in to forecasts for November

European inflation is heavily impacted by seasonal patterns in November as categories such as “Recreation and Culture” and “Restaurants and Hotels” see material downside due to a seasonal drop in demand. On top of that, the black week is getting increasingly tricky to navigate in November inflation data and our web scraping of trends in German online stores point towards a clear deceleration in price pressures through November in Clothing and Footwear and electronics in particular.

A typical median value for the November MoM print is between -0.3% to -0.4%, well below the current consensus after a few years of less pronounced seasonal patterns during the Pandemic.

Chart 1: November MoM inflation decomposed over the past five years