EUROPEAN INFLATION: German State-Level Details Point Towards Lower Services
Looking a bit closer at this morning's German CPI state level September inflation data, core and services inflation appear to have slowed, while for goods the data points towards a broadly unchanged yearly rate on the back of firmer food inflation. Overall, analyst's expectations ahead of the release appear to have broadly materialized in February.
- Looking at the categories with heavy services weighting, we see decelerations in healthcare (2.7-2.8% vs 3.1% Jan), communication (-1.2% to -1.3% vs -0.9% Jan), recreation and culture (1.1-1.2% vs 1.7% prior) and restaurants and hotels (note a base effect is dampening here, we see it around 4.2% vs 4.4% Jan). Education seems to have accelerated noticeably, meanwhile (around 5.4% vs 4.7% Jan).
- Food (incl. alcoholic beverages, distinct category to food-only published by Destatis later) inflation appears to have seen a pronounced bump, to around 2.9% Y/Y (1.4% Jan) - in line with Goldman Sachs' expectations ahead of the release for a higher unprocessed food category this month.
- Core goods overall seem to have decelerated again - we see clothing and footwear very broadly around 0.6% Y/Y (2.9% Jan) but furnishings and household equipment a bit firmer than before, around -0.7% Y/Y (-0.8% Jan).
- Note that the above gives an indication of the national CPI rather than HICP, but we have already seen services inflation decelerate in the French and Italian prints this morning.
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SONIA: SONIA FIX - 29/01/25
SONIA FIX - Source: BBG/ICE
- 1M 4.53320 -0.0064
- 3M 4.48380 -0.0055
- 6M 4.39940 -0.0058
- 12M 4.28240 -0.0027
MNI: US MBA: MARKET COMPOSITE -2.0% SA THRU JAN 24 WK
- MNI: US MBA: MARKET COMPOSITE -2.0% SA THRU JAN 24 WK
FRANCE: PS Sets Out Conditions To Return To Budget Talks
The centre-left Socialist Party (PS) has set out the conditions that could see it return to the negotiating table with the gov't on the subject of the 2025 state budget. The PS confirmed it had suspended cooperation after comments from PM Francois Bayrou made on 27 Jan referring to a "feeling of flooding" with regards to immigration (see 'FRANCE: Greens & PS Criticise PM's Immigration Comments As Budget Talks Halted', 1005GMT). Le Monde reports that the PS could take part in budget talks if the PM walks back his comments, an immediate increase in the minimum wage, and a commitment not to touch state medical aid (AME) for illegal immigrants.
- Gov't spox Sophie Primas says that the budget talks must not be taken "hostage". Primas: "This is the number one issue for our country. We must reach an agreement."
- The demand on AME made by PS Mayor of Nantes, Johanna Rolland, could cause significant issues for the gov't. AME allows those without residency permits to receive medical treatment, but the budget draft passed by the Senate cut its budget by EUR200mn.
- Should the gov't seek the restoration of AME funds it risks a censure motion being moved by the far-right Rassembelement National (RN). Parties of the leftist New Popular Front alliance have proved reluctant to back RN censure motions, but the far-left La France Insoumise could support such a motion given its staunch anti-gov't stance. It would also put the nominally pro-gov't conservative Les Republicains in a difficult position.
