EUROPEAN INFLATION: MNI Projects 2.3% Y/Y German National CPI, Core 2.7-2.8%
Oct-30 11:21
From state-level data that equates to 86.7% weighting of the national September flash German CPI print (due at 13:00 GMT / 14:00 CET), MNI estimates that national CPI (non-HICP print) rose by around 2.3% Y/Y (2.4% prior) and rose around 0.3% M/M. There may be risks of the national print rounding even higher. See the tables below for full calculations.
- Analyst consensus stands at 2.2% Y/Y and 0.2% M/M, risks to consensus therefore appear to be skewed to the upside.
- Current tracking of Core CPI (ex-energy and food, based on 50% of the national index) implies around 2.7-2.8% Y/Y (2.8% prior). This would also represent an upside surprise vs the limited number of analyst views we've seen on this.
- We will provide a follow-up bullet looking at underlying drivers in due course.
- Note: These estimates are in relation to the national CPI print, not the HICP print which feeds into the Eurozone HICP print that the ECB targets. The magnitude of surprises to consensus can sometimes be different due to the different methodologies and weights used in national CPI vs HICP - but the direction of the surprise is generally the same.
| Y/Y CPI (Reported) | October | September | Difference |
| North Rhine Westphalia | 2.3 | 2.3 | 0.0 |
| Hesse | 2.4 | 2.6 | -0.2 |
| Bavaria | 2.2 | 2.4 | -0.2 |
| Brandenburg | 2.6 | 2.6 | 0.0 |
| Baden Wuert. | 2.3 | 2.7 | -0.4 |
| Berlin | 2.3 | 2.5 | -0.2 |
| Saxony | 2.1 | 2.2 | -0.1 |
| Rhineland-Palatinate | 1.9 | 2.1 | -0.2 |
| Lower Saxony | 2.2 | 2.3 | -0.1 |
| Saarland | 2.2 | 2.5 | -0.3 |
| Saxony-Anhalt | 2.7 | 2.8 | -0.1 |
| Weighted average: | 2.33% | for | 89.1% |
| M/M CPI (Reported) | October | September | Difference |
| North Rhine Westphalia | 0.4 | 0.2 | 0.2 |
| Hesse | 0.3 | 0.2 | 0.1 |
| Bavaria | 0.3 | 0.4 | -0.1 |
| Brandenburg | 0.4 | 0.1 | 0.3 |
| Baden Wuert. | 0.3 | 0.2 | 0.1 |
| Berlin | 0.2 | 0.4 | -0.2 |
| Saxony | 0.3 | 0.2 | 0.1 |
| Rhineland-Palatinate | 0.2 | 0.2 | 0.0 |
| Lower Saxony | 0.2 | 0.2 | 0.0 |
| Saarland | 0.2 | 0.1 | 0.1 |
| Saxony-Anhalt | 0.2 | 0.3 | -0.1 |
| Weighted average: | 0.33% | for | 89.1% |
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OUTLOOK: Price Signal Summary - Recent Recovery In Bunds Appears Corrective
Sep-30 11:17
- In the FI space, Bund futures have recovered from their recent lows - this appears to be a correction for now. Key support and the bear trigger remains exposed. It lies at 127.61, the Sep 3 low. Clearance of this level would cancel a recent bullish theme and confirm a continuation of the medium-term bear cycle. For bulls, a reversal higher would refocus attention on key resistance at 129.44, the Sep 10 high. First resistance is 128.84, the 61.8% retracement of the Sep 10 - 25 bear leg.
- Gilt futures have recovered from their latest lows. The move down last week strengthens a bearish theme and does suggest the end of the recent corrective phase between Sep 3 - 11. Note that on the continuation chart, moving average studies are in a bear-mode position, highlighting a dominant downtrend. A resumption of weakness would open 89.94, the 76.4% retracement of the Sep 3 - 11 corrective phase. Initial resistance to watch is 91.28, the Sep 24 high.
UK: PM To Deliver Conference Speech @14:00BST Under Major Political Pressure
Sep-30 11:14
Prime Minister Sir Keir Starmer will deliver a keynote address to the annual conference of his centre-left Labour Party at ~14:00BST (09:00ET, 15:00CET) Livestream here. The speech is seen as an important one for the PM as he is set to remain under intense political pressure in the short and medium term:
- The latest opinion polling from Ipsos shows Starmer with the lowest personal satisfaction rating of any British prime minister since the outlet began conducting surveys in 1977. The PM's net rating for September is -66, with the previous recorded lows coming from Conservative prime ministers, Rishi Sunak (-59, April 2024) and John Major (-59, August 1994).
- The upcoming budget announcement on 26 November is expected to raise the UK's tax burden further from already post-war highs. MNI's Markets team have assessed some of the potential options for the chancellor ahead of the announcement. Higher taxes without demonstrable improvements in public services could spur further shifts in support towards Nigel Farage's right-wing populist Reform UK.
- The next electoral test for the PM and Labour comes in May 2026. Local elections will take place across swathes of England in addition to elections to the Scottish and Welsh parliaments. Poor results in these contests, particularly the loss of first place in Wales and control of cities in the Midlands and northern England to Reform UK could spark a leadership challenge against Starmer.
EUROPEAN INFLATION: German State-Level Details: Firmer Energy, Services
Sep-30 11:07
Looking a bit closer at this morning's German state level September CPI data, an energy acceleration to around -0.7% Y/Y (from -2.4% in August) stands out, bringing overall goods inflation to around 1.5-1.6% Y/Y (1.3% prior). Also services looks firmer than previously this time, at around 3.3% Y/Y (3.1% prior).
- Food inflation appears to have tapered off a little, to around 2.9% Y/Y in September (incl. non-alcoholic beverages, vs 3.2% prior).
- Within the services-heavy subcategories, the largest magnitude of change will likely be in education, we see the category around 3.9% Y/Y (from 5.1% prior, but note its low weighting in the CPI basket). Restaurants and hotels meanwhile seem to have accelerated, to around 3.9% - 4.0% (3.6% prior). Restaurants will see a VAT decrease in January in Germany.
- The mixed-weighting transport category meanwhile also accelerated, that comes on the back of the mentioned energy acceleration which is driven by base effects. We see transport at around 2.5% Y/Y in September (vs 1.4% prior).
