Low value inflation

Daily update

Preliminary December German and French inflation data is not likely to interest markets. The German figures should show moderation, but some of this is a lower weighting to package holidays (which tend to add to inflation)—a technical shift not necessarily indicative of any dramatic changes in inflation pressures. The ECB is likely to remain on its course of masterful inactivity (markets like the ECB being inactive).
European inflation data has some use in the later release of details. This provides helpful benchmarks for international comparisons. The fact that German banana prices have fallen since March, while US prices have risen, or that European washing machine prices are firmly in deflation when US prices are rising offers interesting insights into policy consequences and profit-led inflation episodes.
The UK BRC December shop price index showed ongoing deflation in non-food items, but food retailers are pushing through price increases. This does not translate directly into consumer price inflation—retail sales are a minority of the consumer price calculation, and a large part of Christmas retail sales takes place online.
The US has little on the data calendar, though markets continue to have an interest in any evolution of the plan for “running” Venezuela, and how much that will cost the US.