NORGES BANK: Rate Held At 4.00%, Unchanged Guidance

Spain PPI fell sharply in November, driven almost entirely by weakness in volatile energy prices, and helped lower by base effects from a strong rise in November 2024. Ex-energy, PPI showed modest growth and continuation of a much flatter trend since early 2024.

• PPI fell 2.5% Y/Y (vs a 0.8% rise in Oct, revised up 0.1ppt). Energy sectors were the overwhelming negative drivers.
• Energy PPI dropped sharply to -9.1% Y/Y (vs 2.0% Oct). INE notes this "resulted from lower prices for the production, transmission, and distribution of electricity and, to a lesser extent, for gas production and distribution of gaseous fuels, compared to the increase in November 2024."
• "It is worth noting, although in the opposite direction, the rise in prices for oil refining, which was greater than in [November 2024]." - this grew 4.5% Y/Y.
• Stripping out energy, the changes are much more modest, with the index instead having grown 0.5% Y/Y (vs -0.1% Oct) for 3pps above the overall PPI Y/Y rate.
• Month-on-month, PPI slipped -0.4% M/M (vs 0.5% Oct). The biggest upward drivers for monthly changes were oil refining (4.5% M/M), metals (3.0%), and animal/vegetable oils (1.6%).
• The largest downward monthly drivers were production, transport and distribution of electricity (-4.9% M/M), gas production (-3.6%), and processing/preserving meat products (-0.8%).

OEG6 115.5p, sold at 14 in 2k.

German spending slowed in November according to Federal Ministry data out today. While a shortfall in spending relative to the budget does not come unexpected after analysts flagged implementation speed risks following the initial announcements, the current pace does underscore these risks further, which would take away from any net-positive impact on German GDP growth in the near term. 

• The E500bln infrastructure fund took up E6.0bln of credit in its second operational month, bringing its total take-up to E18.8bln, around half of the E37bln planned for this year, with just December to go. This underscores downside risks in implementation speed which we flagged since the fund was announced.
• As mentioned, a set of institutes also worry to what extent if these funds are in fact spent on additional infrastructure projects. The Bundesbank sees the split here around 50/50 according to their December projections, with the remaining funds being used for consumptive spending on net.
• Core budget fiscal deficit amounts to E73.4bln though November - E6.6bln more than in October, and a slowdown after an increased pace in the months prior (see chart). For 2025 in total, an E81.9bln deficit is planned for the core budget.