Well, the latest German state CPI readings are starting to paint a fairly clear picture ahead of the national report later today.
The state readings released around the same time:
- Bavaria September CPI +3.2% vs +2.9% y/y prior
- Saxony September CPI +3.3% vs +2.9% y/y prior
- North Rhine Westphalia September CPI +3.3% vs +2.9% y/y prior
- Baden Wuerttemberg September CPI +2.9% vs +2.6% y/y prior
The main takeaway here is that the acceleration isn't isolated to just one or two states. All four readings moved higher by at least 0.3 percentage points compared with August, with Saxony and North Rhine Westphalia both seeing inflation rise to 3.3%.
That offers a fairly strong indication that German inflation is set to accelerate at the national level as well, with headline CPI looking increasingly likely to push back above the 3% mark.
Just keep in mind though that the state readings aren't a perfect proxy for the national figure, so there can still be some deviation when the preliminary numbers are released later. However, they have historically been a useful gauge and today's readings arguably point to some upside risk to the 3.1% consensus, with a national CPI reading around 3.2% now looking quite plausible.
For the ECB, that will keep the focus firmly on the renewed pickup in inflation pressures. One month's data isn't going to settle the policy debate by itself, but another acceleration in German inflation would make it harder for policymakers to look past the recent rebound in price pressures.
The national CPI report will be the next key piece of the puzzle later today. Besides the headline figure, I'd be keeping a close eye on core inflation to see whether the latest pickup in price pressures is starting to broaden beyond energy.
This article was written by Justin Low at investinglive.com.