April 30, 2021
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EA: HICP boosted by Spanish energy

  • Flash EA HICP inflation increased by 0.3pp to 1.6% in Apr-21, in line with the consensus. It was 0.1pp above our forecast, though, as energy and food strengthened by more. Services and non-energy industrial goods were in line, so the core was too.
  • Most of the upside news came with Spain’s flash release yesterday. We have enhanced our model for Spain with daily retail energy prices to avoid future surprise here. Overall, our EA forecast stays about a tenth higher, averaging almost 1.8% in 2021.

April 29, 2021
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Reflationary decoupling

  • Surging US inflation arguably risks spilling over to Europe amid a high degree of co-movement between them, but the relationship can break up like it did in 2005-06.
  • The spillover of US reflation is likely to be incomplete, especially to the euro area, so relative price level hikes can be sustained for inflation-linked instruments, in our view.

April 21, 2021
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UK: subdued reflation pressures in Mar-21

  • Inflation disappointed expectations again in Mar-21 as it only increased to 0.7% y-o-y on the CPI and 1.5% on the RPI, although the latter was precisely in line with our forecast (index at 296.9). Food and recreation prices were the main sources of weakness.
  • The CPI outlook seems slightly softer than we previously thought. Further increases remain likely, aside from a July blip, with the peak slightly over 2% in Nov-21. Subdued median inflation suggests underlying pressures are not reflating excessively.