7 Jan 2015
Eurozone negative inflation for the first time since 2009, ECB QE likely – KBC
FXStreet (Barcelona) - The KBC Bank Research Team shares that euro zone HICP fell into negative territory for the first time in more than 5 years, dropping to -0.2%Y/Y in December triggered by falling energy prices, and further believe ECB might announce a QE package later this month as oil continues to decline.
Key Quotes
“For the first time in more than 5 years, euro zone HICP inflation fell back into negative territory. According to the preliminary estimate, euro zone HICP inflation dropped to ‐0.2% Y/Y in December, from 0.3% Y/Y in November. The outcome was slightly below the consensus estimate, which was looking for a drop to ‐0.1% Y/Y. The downward surprise was however limited as inflation was actually ‐0.15% Y/Y.”
“Looking at the details, downward price pressures were mainly based in energy, as energy prices were down by 6.3% Y/Y. Also prices of food, alcohol & tobacco dropped further, to 0% Y/Y from 0.5% Y/Y. Core inflation picked up, from 0.7% Y/Y to 0.8% Y/Y, off its record low reading.”
“Within core inflation, prices of non‐energy industrial goods were flat compared with last year, but up from ‐0.1% Y/Y in November. In the services sector, prices rose by 1.2% Y/Y in December, unchanged from November and October.”
“Although euro area inflation fell into negative territory in December, the details are a little more encouraging. They suggest that downward price pressures were only based in energy. The pick‐up in core inflation indicates that, for now, deflation in the energy sector is not filtering through into other sectors.”
“Still, we believe that the ECB is likely to announce a QE package later this month as the sell‐off in the oil price continues, which might push inflation even further down.”
Key Quotes
“For the first time in more than 5 years, euro zone HICP inflation fell back into negative territory. According to the preliminary estimate, euro zone HICP inflation dropped to ‐0.2% Y/Y in December, from 0.3% Y/Y in November. The outcome was slightly below the consensus estimate, which was looking for a drop to ‐0.1% Y/Y. The downward surprise was however limited as inflation was actually ‐0.15% Y/Y.”
“Looking at the details, downward price pressures were mainly based in energy, as energy prices were down by 6.3% Y/Y. Also prices of food, alcohol & tobacco dropped further, to 0% Y/Y from 0.5% Y/Y. Core inflation picked up, from 0.7% Y/Y to 0.8% Y/Y, off its record low reading.”
“Within core inflation, prices of non‐energy industrial goods were flat compared with last year, but up from ‐0.1% Y/Y in November. In the services sector, prices rose by 1.2% Y/Y in December, unchanged from November and October.”
“Although euro area inflation fell into negative territory in December, the details are a little more encouraging. They suggest that downward price pressures were only based in energy. The pick‐up in core inflation indicates that, for now, deflation in the energy sector is not filtering through into other sectors.”
“Still, we believe that the ECB is likely to announce a QE package later this month as the sell‐off in the oil price continues, which might push inflation even further down.”