EUROPEAN INFLATION: Non-Energy Cooling In Spanish HICP Despite Weight Boost

Spain January final HICP inflation confirmed flash estimates at 2.9% Y/Y (vs 2.8% in Dec) and the sequential reading at -0.1% M/M (vs 0.4% in Dec). The national CPI was one-tenth below flash and consensus at 2.9% (vs 3.0% flash, 2.8% prior), after flash came a tenth higher than expected, though on a sequential basis it confirmed flash at 0.2% M/M (vs 0.5% in Dec). 

• All major HICP sub-components softened except for energy.
• Services inflation softened to 3.5% Y/Y (vs 3.7% prior). Package holidays fell 14.9% M/M reversing most of Decembers 17.5% gain, transport services also decreased by 4.9% M/M (vs -0.1% in December), as did accommodation prices printing -4.9% M/M (-1.8% prior).
• Energy inflation continued to rise to 7.8% Y/Y, from 5.5% in Dec and 2.8% in Nov, making it the highest since May 2024.This was driven by electricity, gas and other fuels rising 8.9% M/M (vs 1.2% rise in December).
• Non-energy industrial goods inflation was flat Y/Y (vs 0.3% in Dec).
• Processed food inflation softened to 2.4% Y/Y from 2.6% in December, while unprocessed food inflation accelerated to 2.5% Y/Y from 2.1% - the second consecutive monthly acceleration.
• The updated HICP 2025 weightings show 'Hotels, cafes and restaurants' saw the biggest upward change in weights of 0.9ppts, whilst 'Food and non-alcoholic beverages saw the largest downward move of -0.8ppts. This should have biased HICP Y/Y higher, considering hotels, cafes and restaurants accelerated further to 4.4% Y/Y in Jan from 4.1% in Dec whilst food and non-alcoholic beverages were softer than HICP at 1.8% Y/Y.