STIR: Fresh Selling IN SONIA Into Gilt Open

German final November HICP was unrevised from the flash readings at 2.4% Y/Y (2.4% prior) and -0.7% M/M (+0.4% prior). The final reading to CPI was also unrevised at 2.2% Y/Y (2.0% prior) and -0.2% M/M (+0.4% prior). Core CPI printed at 3.0% Y/Y (2.9% prior), the same rate as last April.

• Overall, the data confirms the main conclusions from the flash reading - services remained stable on its yearly rate (contribution +0.01pp vs prior) and goods inflation decelerated, driven by energy (contributing +0.18pp vs prior).
• Developments within the services subcategories were mixed, as projected by MNI after state-level data - the standout was recreation and culture, whose -0.05pp contribution vs October was fully driven by package holidays. Details see table.
• Looking ahead, barring an unexpected uptick, lower services momentum of the second half of 2024 opens up the possibility for a declining yearly rate in the category at the beginning of 2025 ('BUBA Estimates Softer M/M German Core & Services CPI' - MNI, Nov 28).
• More generally, at least national CPI is overall expected to tick up towards the beginning of 2025, however.

MNI’s inflation breadth tracker (see chart below) shows disinflation stalling further in the low-inflation categories in November, with the percentage of ECOICOP (European classification of individual consumption according to purpose, a standardized category split) items printing at or below 2% falling to 50.2% from 50.6% in October. In the high-inflation categories, disinflation progressed a little, with the percentage of categories, above 6% falling to 10.7% in November from October's 11.4%.

The Swedish October activity data were soft, suggesting underlying domestic demand remained weak to begin Q4. A 25bp Riksbank cut in December was already more than fully priced heading into the release, but the data will weigh on the revised rate path presented at the upcoming decision.

• Statistics Sweden notes that the 0.4% M/M GDP print (vs a 1.1pp downwardly revised -1.5% prior) was driven by “weak figures for household consumption expenditure and exports concerning goods, with the latter mirroring weak figures in manufacturing”.
• The household consumption indicator fell 0.3% M/M for the second consecutive month. However, we note that 3m/3m consumption growth accelerated for the fourth consecutive month to 0.9% (vs 0.7% in September and -1.0% in June). This is consistent with the strong recovery in consumer confidence since the end of 2022.
• Retail trade in both food and beverages and clothing and footwear was an important source of growth in the 3m/3m consumption measure in October.
• Private sector production fell 0.8% M/M, with September revised four tenths lower to 0.7% M/M. Falls in industry and services was offset a little by construction – with that sector likely starting to benefit from lower Riksbank policy rates.

GBP STIR markets little changed after yesterday’s modest dovish repricing.

• SONIA futures flat to -1.0.
• BoE-dated OIS showing essentially 0bp of movement for next week, 20bp of cuts for Feb, 29bp of cuts through March and 84bp of easing through ’25.
• The latter remains off the multi-week dovish extreme of ~88bp but is notably more dovish than the ~55bp briefly printed in the days that followed the BoE’s November decision.
• The latest Indeed job ads findings provided several further warning signals surrounding the labour market. In terms of inflation feedthrough, the website noted that while “posted wage growth has eased but remains strong, particularly for lower-paid and in-person roles, but is likely to gradually wane heading into next year.” That latter seems to be consistent with the BoE's current preference for gradual cuts.
• Little of note on the UK calendar today, which will leave focus on cross-market spillover and the U.S. CPI release.