Eurozone: Positive development on inflation front? - TDS

Analysts at TD Securities point out that the Eurozone’s headline inflation in January was as expected at 1.4% y/y, but core inflation surprised slightly to the upside, at 1.1% y/y.

Key Quotes

“Limited details in the report show that services jumped strongly to 1.6% y/y (matching its highest rate since early 2017), while core goods inflation slowed slightly to 0.3% y/y. Unless the full details on 21 Feb point to a specific 1-off factor, this should be interpreted as a positive development, potentially reflecting stronger wage growth and decent domestic demand in the euro area.”

“Revisions to January's Manufacturing PMIs showed German in slightly deeper contraction territory than previously reported, at 49.7, while the broader regional index remained unrevised at 50.5.”