Commentary Directory
- Q1 GDP Growth Jumps 1.1% on Strong Personal Consumption
- A Strong March Leads to a Surge in Chinese GDP in Q1 2023
- Durable Goods Retail Sales Suffer from High Interest Rates and Wary Consumers
- Choppy GDP Means UK Should Avoid Q1 Recession
- Japanese Consumer Confidence Jumps to Highest Level in Over a Year
- The End of Summer Sees the End of Disinflation in Europe
- Labor Market Indicators are Starting to Unify on Easing in Hiring
- Inflation and Tight Financial Conditions Weigh on the German Consumer
- Euro Area Money Supply Contracts for the First Time Since 2010
- Dismal Economic Data Out of Germany
- Core Durable Goods New Orders See Gentle Uptrend in July
- More UK Data Pointing to Q3 Decline
- Whispers of a UK Contraction in Q3
- Japan's Core Inflation Resumes Uptrend in July
- Early July Economic Data Leads to a Sharp Increase in Q3 Growth Expectations
- UK CPI: Energy Inflation Crashes but Services Inflation is Still Sticky
- China's Weak Start to Q3 Means More PBoC Easing
- A Breather for the Eurozone as Inflation Hits Two-Year Low
- Germany's September CPI Report: A Clearer Picture of Inflation Trends
- US Manufacturing Demonstrates Resilience Amidst Volatility in August
- The ECB Prepares to Address Excess Liquidity Through the MRR
- Bank of Japan is Too Optimistic on Inflation
- The Bank of England Pauses in a Near Split Decision
- UK Inflation August Update: A Precursor to the Bank of England's Announcement
- Housing Starts Tumble in August Amid Rising Mortgage Rates
- US Retail Sales Grow at Fastest Monthly Rate Since the Start of the Year
- US Consumer Prices Surge in August Driven by Energy Costs
- August NFIB Survey Showed a Tough Environment for Small Businesses
- All Signs Point to a Weaker Labor Market in August
- Chinese CPI Trying to Buck the Deflation Trend
- Energy Prices Rise but the Core Disinflationary Trend is Maintained in September
- PPI's Quiet Rise and the Energy Elephant in the Room
- Small Businesses Grapple with Inflation and Financial Strain in September
- A Wacky September Jobs Report Shows Strong Labor Market
- A Look at the Fragile US Labor Market Ahead of the Nonfarm Payrolls Report
- Thoughts on GME and This Week in the Stock Market
- Record Home Price Levels Point to Strength in Post-Pandemic Economy
- The Stock Market Looks Overvalued, but It's Probably Not
- China GDP Growth Surpasses Expectations
- President-elect Joe Biden Introduces His "American Rescue Plan"
- Political Polarization Intensifies with Another Impeachment Along Party Lines
- Metal Demand Has a Bright Future in 2021 and Beyond
- What Happened to That US-China Trade Dispute?
- Civil Unrest, A Rising Threat to the 2021 Economy
- What's in the $900 Billion Relief Plan?
A Breather for the Eurozone as Inflation Hits Two-Year Low
Jacob Hess
September 29, 2023
- Euro Area
- Inflation
Euro area inflation showed signs of cooling off in September, registering at 0.3% month-over-month (MoM) and 4.3% year-over-year (YoY). This is a notable drop from the 5.2% YoY reported in August and marks the lowest annual inflation rate since October 2021. Core inflation, which excludes volatile items like food and energy, followed suit, coming in at 0.2% MoM and 4.5% YoY, also slower than the previous month's 5.3% YoY.
The deceleration in price growth was evident across all segments. Food prices inched up by 0.1% MoM and 8.8% YoY (lower than previous annual rate of 9.7% YoY), while energy prices rebounded by 1.4% MoM but were still down by -4.7% YoY (also lower than previous YoY rate of -3.3% YoY). In terms of goods and services, annual inflation rates also cooled. Goods inflation was 2.2% MoM and 4.2% YoY, down from 4.7% YoY, and services inflation was -0.9% MoM and 4.7% YoY, down from 5.5% YoY.
The recent dip in annual inflation to an almost two-year low is undoubtedly good news for everyone, including the European Central Bank (ECB). This cooler rate of inflation significantly increases the likelihood that the ECB will hold steady in its next meeting, including concluding that the current policy rate has peaked. However, it is important to note the major drivers of the deceleration this month. Much of the cooling in the inflation rate can be attributed to base effects in the German CPI report. Additionally, rapid disinflation in two other large European countries—Belgium and the Netherlands—has likely had a significant impact on the euro area level numbers. Belgium's September inflation rates were -0.4% MoM and 0.7% YoY, while the Netherlands posted rates of -0.8% MoM and -0.3% YoY.
It's not time to let our guard down just yet. There are some upside risks to consider, particularly the recent rise in energy prices. This uptick could reverberate throughout various goods and services industries, leading to rising costs that could eventually be passed on to consumers. So while the latest inflation data offers some room for cautious optimism, it's essential to keep an eye on these other factors that could influence the inflation trajectory in the coming months.
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