"Hang-on"
Hot European inflation and global services economy in full bloom
France, Spain, Germany, Italy all reported higher-than-consensus CPI prints for February, leading to an aggregate for the Eurozone of 8.5% YoY vs 8.2% expected, and barely 10bps below January. Talk about “sticky”. The following drivers are at play:
- Energy inflation is coming down but still tracking at ~14% YoY
- Food inflation (~15% YoY) is still up because it is lagging energy. It will very likely weaken at some point this year (global FAO food indices have come down)
- Core inflation remains sticky at 4.5% - 6% YoY. This will be the battleground of the European Central Bank (ECB), this and historically strong wage growth
The PMIs...