Morning Brief – German CPI in focus

Markets are awaiting the release of German CPI inflation data this morning as the economic docket is relatively light. Already we have seen strong CPI data from individual German regions.

This morning the North Rhine Westphalia September monthly CPI reading posted a 1.8% increase in inflation, as opposed to the 0.3% increase seen in August.

The North Rhine Westphalia CPI reading on a year-on-year basis came in at +10.1% vs +8.1% for the prior reading seen last month. This is basically warning that German inflation later today is set to see another spike later today.

Strangely, the 1.8% increase is exactly what analysts are expecting to see later today. Analysts also estimate that a 10% rise is coming in overall German inflation. Slightly less than the 10.1% rise seen in the North Rhine today.

Last month the German CPI, harmonized to compared with other European countries, was up 8.8% on the year, the highest level at least since 1996, and rose 0.4% month-on-month.

Annual inflation rate in Germany was confirmed at 7.9 in August of 2022, and again reaching the highest level since the 1990s. This highlighted the impact of the ongoing energy crisis and covid-19 supply chain constraints on households’ finances

The Consumer Price Index in Germany also increased 0.30% on a monthly basis in August of 2022 over the previous month. Therefore, today’s CPI reading is expected to come in almost five times greater than last month.

The price rise recorded for energy products was thus higher than the overall inflation rate despite the relief measures. This is obviously due to several factors. Expect more of the same today.

Expect the euro to come under pressure if we see an even greater reading and European stocks are likely to come under increasing pressure such as we have recently been seeing.