EUROPEAN INFLATION: French CPI Inflation Momentum Rebounded In December
French final December HICP inflation was unrevised from the flash print on a rounded basis at 1.8% Y/Y (vs 1.68% in November) and 0.2% M/M (vs -0.15% prior). On a unrounded basis HICP inflation was 1.75% Y/Y, 1 hundredth softer than the flash reading. CPI inflation was also unrevised from flash at 1.3%. On an unrounded basis, CPI was 3 hundredths softer than the flash estimate at 1.32% Y/Y.
- Core CPI softened to 1.3% Y/Y (from 1.5% in November).
- Services was revised down 1 tenth from flash to 2.2% Y/Y (2.3% in Nov) while core services also softened to 2.6% (vs 2.8% in Nov - there is no flash for this series). The slowdown in services was in part due to prices of communication services falling 14.7% (vs -12.2% prior).
- The broad "manufactured products" component was unrevised from the flash print at -0.4% Y/Y (vs -0.3% prior). Core manufactured products fell at a steeper rate 0.4% Y/Y (from -0.2% in Nov).
- The softening in services and manufactured products is offset by energy rebounding between November and December; it was unrevised from flash at 1.2% Y/Y (vs -0.7% in Nov).
- INSEE's seasonally adjusted CPI series highlights momentum rebounding after having eased for the previous few months. CPI rose 0.4% M/M seasonally adjusted (SA), after a flat reading in November. The 3m/3m SA annualised rate rose 0.18% in December (vs a fall of 0.71 in Nov), and the 3m annualised rate rose a solid 2.63% (from -1.45% in November) - the firmest since August 2024.
- There was a marginal decrease in the proportion of subcomponents with annual inflation rates above 2% in December (34% vs 35% prior), with the proportion of components with annual inflation rates above 6% also falling marginally to 10% from 11% in November.
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FRANCE DATA: Dec Flash PMI: Weak Demand Weighs On Sales, Orders and Employment
The French flash December composite PMI was a little better than expected at 46.7 (vs 46.0 cons, 45.9 prior). However, this masked divergence between services (48.2 vs 46.9 cons and prior) and manufacturing (41.9 vs 43.0 cons, 43.1 prior). This was the weakest manufacturing PMI reading in 55-months.
Key notes from the release:
- "Surveyed manufacturers frequently remarked on the adverse impact of weak demand conditions. Services companies on the panel also noted lower sales, with some respondents mentioning that political uncertainty was a hindrance"
- "Domestic political instability, softness in industries such as construction and automotives and lower interest from clients elsewhere in Europe dampened sales volumes, according to anecdotal evidence".
- "Indeed, the latest survey data revealed a steep month-on-month drop in new export orders, and one that was markedly quicker than that seen for new business overall"
- "Persistent evidence of spare capacity, coupled with a further shrinkage of new order intakes, led employment levels to fall"..."Labour market trends deteriorated in both monitored sectors, with a faster pace of factory job shedding combining with renewed headcount cuts at services companies".
- "Both manufacturers and service providers recorded weaker rises in their input prices"...", selling prices were broadly unchanged on the month as firms in both sectors reported that competitive pressures had prevented them from raising their charges".
MNI: GERMANY DEC FLASH MANUF PMI 42.5 (FCST: 43.1); NOV 43.0
- MNI: GERMANY DEC FLASH MANUF PMI 42.5 (FCST: 43.1); NOV 43.0
- GERMANY DEC FLASH SERVICES PMI 51.0 (FCST: 49.3); NOV 49.3
CROSS ASSET: No Real Reaction To French PMIs
Little tangible reaction to the mixed French PMI data, which saw the 3 headline metrics remain in contractionary territory.
- Bunds & EUR/USD little changed from pre-release levels, despite initial, contained two-way price action.
- OAT/Bunds also little changed at ~79.5bp after Moody’s off-cycle one-notch downgrade of France took the spread above 80bp this morning.
- Euro Stoxx 50 futures fade some of their pre-data recovery from lows, with CAC 40 futures unwinding some of their early underperformance (which was also linked to Moody’s action on France).
