Inflation also slows down in France after Germany. Positive bags, down the spread

Investors are heaving a sigh of relief after slowing inflation in France and Germany and positive signals from services PMIs showing that Eurozone economic activity contracted less late last year than initially thought. Good news that gave strength to the European stock markets, which on Wednesday 4 January all opened upwards pending the Fed minutes which will be distributed with closed European stock markets and with the hope of an easing of the monetary tightening by the ECB, precisely in the light new inflation data. The spread is declining. The spread between the Btp and the Bund on Wednesday 4 January stood at 205 basis points. The change compared to the close of the previous day of -1.71%. The Italian 10-year yield +4.35%.

Inflation down in France

In France, according to the preliminary estimate of the French statistical institute Insee, prices are down by 0.1% in December, and inflation slows down to 5.9% on the year after 6.2% in November . The decrease in energy costs above all has an impact on the reduction in prices. However, the Institute warned that inflation should reach 7% at the beginning of 2023, to decrease from March onwards.

The price run slows down in Germany

In Germany, according to data communicated on 3 December by the Federal Statistical Office, inflation fell to 8.6% on the year from 10% in November and below forecasts which ranged from +7.6% to +10 .3 percent. According to analysts, the price race slowed after the German government paid household gas bills for the month of December, offering a temporary reprieve from the country’s cost-of-living crisis. The harmonized data on consumer prices (+9.6%) is the weakest since August. However, the Bundesbank warns that consumer price inflation will remain above 7% in 2023 and has warned against misinterpretations of individual figures, citing a large amount of uncertainty. Finance Minister Christian Lindner started the new year by promising that the government will do its part to ensure that inflation returns to the 2% target.

And in Italy?

On Thursday 5 January, Istat will release the preliminary data on consumer price trends in December. To understand if the slowdown recorded in France and Germany has also occurred in Italy, we will have to wait for these new data. But some studies published between December and the start of the new year seem to suggest just that. According to estimates by the EY Italian Macroeconomic Bulletin, the inflation rate will pass from 8.2% in 2022 to 7.1% in 2023. A Coop survey, published on Wednesday 4 January, also forecasts continued sustained inflation for 2023 but lower than that of 2022 (+6.1% according to Italian managers). But the decline will not concern processed food goods whose prices will continue to run: an average increase of 6.7% is expected according to Italian managers in the Food & Beverage sector.