EM CEEMEA CREDIT: First Abu Dhabi Bank: Mandate € L5Y Green

German final September HICP was unrevised from the flash readings at 2.4 Y/Y (2.1% in Aug) and 0.2% M/M. The final reading to CPI was also unrevised at 2.4% Y/Y (2.2% in Aug) and 0.2% M/M whilst core CPI printed at 2.8% Y/Y after three consecutive months at 2.7%. The main conclusions from the flash reading were confirmed. 

• Services accelerated to 3.4% Y/Y (confirming the flash reading), a 0.3pp reacceleration after two consecutive prints at 3.1%, adding 0.13pp to headline inflation in September. Goods inflation meanwhile also accelerated, with a 0.08pp higher contribution to headline, mostly on the back of higher energy amid base effects.
• As we projected after the state level data ahead of the national-level flash release, the mixed-weighting transport category saw noticeable moves, accelerating to 2.4% (2.5% MNI tracking, 1.4% prior). Out of the 0.14pp the category added to headline in September, 0.13pp came from car fuels (accelerating to 1.1% Y/Y from -2.5% in August amid base effects looking at the -0.4% M/M print), and 0.02pp each from rail and air transport services (outweighed by a negative 0.04pp impact from car prices).
• The remainder of the services acceleration was broad-based across categories: 0.03pp came from package holidays, 0.02pp from lodging away from home, and the remaining 0.04pp are difficult to attribute when rounding contributions to 2dp.
• Food (and non-alcoholic beverages) prices took away 0.04pp from headline in September amid its deceleration to 2.9% Y/Y (from 3.2% prior).
• The Bundesbank thinks German inflation "is likely to be temporarily somewhat higher in the next few months" as energy inflation will turn positive and services are also set to see temporarily higher Y/Y rates again, both amid base effects (August monthly report).
• [See the disclaimer below the table on using the changes in contributions with caution]

Some details of French PM Lecornu's budget proposals are being circulated on local media:

• From Le Parisien: "The tax on high incomes prepared under Michel Barnier has been extended for a year, while the exceptional tax on the profits of large companies has been partially renewed. Similarly, the draft budget for the next budget introduces a tax on asset holding companies. On the social security side, the draft budget provides for a significantly reduced increase in health spending, at 1.6%."
• Additionally: "According to the social security budget proposal, the government is considering freezing retirement pensions and social benefits in 2026."

We have not seen any details yet on the treatment of the 2023 pension reform. This will be a key area of contention, particularly between the Socialists (who want the reform suspended) and the LR (who are opposed to such a move, but may not necessarily censor the Government for it).

The far-right will support the far-left's already-submitted censure motion, set to be debated on Thursday (according to BFM).

Timings for the day:

• Cabinet meeting (14 Oct) at 11:00CET (05:00ET, 10:00BST), when the draft State Budget (PLF) and Social Security Budget (PLFSS) will be put before the cabinet for its approval
• Lecornu receives government ministers and MPs at Matignon at midday (CET)
• Lecornu general policy statement to the National Assembly 15.00CET (1400BST)