EUROPEAN INFLATION: German State-Lvl Points Towards Firmer Energy, Services Unch

Looking a bit closer at this morning's German state level August CPI data, services inflation appears to have remained roughly unchanged at around 3.1% Y/Y, while goods inflation seems to have picked up this time, we see the category around 1.3% in August. Energy (around -2.4% vs -3.4% July) and food and non-alcoholic beverages (around 3.2% vs 2.8% July) stand behind the acceleration.

• Services-heavy categories screen mixed: We see healthcare around 2.7% Y/Y (2.9% July), communication around -0.5% Y/Y (-0.6% July), recreation and culture around 1.4% Y/Y (0.9% July), education unchanged at 4.9% Y/Y (4.9% July), and restaurants and hotels lower than before around 3.5% Y/Y (3.8% July, that would be the joint lowest rate since July 2021 here).
• Mixed-weighting transport category has accelerated, to 1.4-1.5% Y/Y (1.0% July). This is consistent with fuel inflation having picked up in Y/Y terms this time despite some sequential price decline - a trend which analysts also expect to be apparent in the Eurozone-wide release this month. Some anecdotal evidence from individual states supports the narrative of a lower Y/Y rate in airfares in August.
• Clothing and footwear seems to have given away some of its gains seen in July (which were driven by changing or less material seasonality around summer sales), likely printing around 0.5% Y/Y this time (0.9% July, -0.3% June).