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Euroflation Nugget: Deep deflation tomorrow?

With Spanish and German inflation numbers out today, it’s almost safe to say that Eurostat will deliver a dovish number tomorrow as well.
2023-11-29


Hello everyone, and welcome to a shorter piece on today’s regional CPI numbers, and what to expect for tomorrow’s print.

Main conclusions up-front: 

  • HUUGE dovish surprises in German and Spanish inflation numbers today, smack dab at our forecast from yesterday, where we wrote about the potential of Black Friday sales shining through in this week’s inflation numbers. Germany and Spain combined amount to around 50% of the total EZ CPI basket, so a dovish surprise tomorrow is likely.
  • November’s inflation numbers show the same seasonal tendencies as previous years, with “Recreation and Culture” and “Clothing & Footwear” deflating compared to October based on our regional regression model – the same will happen in the rest of Europe.
  • Food-flation may be back on the rise again based on our models, which would be the main worry for ECB together with what looks to be a bottom in PPI’s. The rest of the basket really smells like 2% if Germany can say anything about the rest of the member countries
  • Our long EUR-bonds bet is really starting to play ball now, but it’s not too late to jump on the train

Soft reports all over the place from Germany and Spain today, cementing our view that EZ inflation will decline rapidly towards target, way before other G7 countries.


With Spanish and German inflation numbers out today, it’s almost safe to say that Eurostat will deliver a dovish number tomorrow as well.

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