September 17, 2021
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EA: missing clothing sales in Aug-21

  • EA HICP inflation for Aug-21 was confirmed at a low 3.0% y-o-y, while the ex-tobacco index printed at 107.54 (0.03 below our forecast). Clothing caused more of the rise than we expected amid missing sales, offset by less strength in housing and transport.
  • The lack of discounting means there is less room to normalise higher, so we trim our Sep-21 forecast by 6bps to 3.2% y-o-y. Our forecast remains above the consensus and ECB from Nov-21 onwards, but we still see it slipping below the target through H2 2022.

September 17, 2021

HEW: central banks following inflation

  • Over the past week, UK inflation surprised to the upside and energy price concerns mounted, squeezing household budgets when retail sales are already falling. Inflation expectations are starting to stretch, but UK labour market data exaggerate growth.
  • Next week is full of central bank decisions. The Norges Bank is set to hike while the Riksbank stays on hold, and we expect the BoE MPC’s new members to support the current purchase schedule. Flash PMIs and confidence surveys will also be released.
  • In Heteronomics news, we are thrilled to finish migrating our inflation models to our new AWS-sponsored infrastructure. Forecasts aren’t changed, but the possibilities grow.

September 16, 2021
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Inflation expectations start stretching

  • New price shocks stretch the peak and persistence of excess inflation. Although we still see this pressure as transitory, we are mindful of the risk expectations might shift. The responsiveness of inflation forwards to spot changes is most concerning.
  • Wage negotiations will be the ultimate check, albeit lagging behind expectations and our statistical measures of underlying inflation. Wages corroborate hawks in Norway, less dovish pressure in the UK and Sweden, while the Euro area remains in a low rut.