Spanish and German CPI point to higher eurozone inflation on Friday

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Prices have been rising for about two years now, when they should have fallen during the coronavirus period, especially crude oil prices, as travel has been very limited during this time. But they have increased and the pace is only accelerating. Last year the FED started getting hawkish when CPI (consumer price index) inflation topped 5% and now that the CPI is heading towards 8% the FED plans to increase by 50 basis points at almost every meeting, after increasing them earlier this month by 0.25%.

Inflation has also increased in Europe and the conflict in Ukraine has only aggravated the situation. Oil jumped to $130 after US sanctions on Russian oil and gas, although WTI crude is trading closer to $100 now. But that was enough to raise pump prices at gas stations, which also affected other products. Food also rose, so CPI inflation is expected to rise to 6.7% from 5.9% in February. This would force the ECB to become very hawkish as well, which would help the euro. The Eurozone CPI report is due out on Friday, but today we got the German and Spanish CPI numbers which gave an indication of where Europe is headed.

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Spain March Preliminary CPI

  • March preliminary CPI year-on-year +9.8% vs. +8.0% expected
  • February CPI year on year +7.6%
  • HICP +9.8% against +8.1% expected over one year
  • Previous HICP +7.6%

That’s a good jump. The Russian-Ukrainian war has undoubtedly exacerbated underlying conditions, with the headline at the fastest pace since May 1985. Underlying inflation is rising to 3.4%, its highest since 2008. It should be noted that the prices of electricity, fuel and food and beverages led the acceleration of inflation over the month. Kapov.

So far, these two headlines underline what the Eurozone economy will face in March:

  • North Rhine-Westphalia March CPI +7.6% vs. +5.3% year-on-year
  • Spain Preliminary CPI for March +9.8% vs. +8.0% expected year on year

It looks quite brutal with the North Rhine-Westphalia report showing a sharp increase in fuel (+24.7%) and household energy (+14.1%) prices on the month. Meanwhile, the Spanish report details a significant acceleration in electricity, fuel and food and beverage prices with the core inflation also falling from 3.0% to 3.4% – its highest level since 2008.

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