Flash June euro area HICP inflation to print at 0.3%

Societe Generale notes:

We expect consumer prices to trend upward from 0.2% yoy in June to 0.3% yoy in July. The energy component is likely to provide a muted push led by stable gasoline prices recorded in the month of July (0.7% mom) but weaker Brent crude prices continue to keep energy component subdued. The food component should also continue to increase albeit at a slightly slower pace compared to June. The core component due to seasonal variations should also register a tepid increase from 0.8% yoy to 0.9% yoy. 

We expect the prices paid for the services component to soften and prices paid for goods to increase noticeably due to seasonal variations. Euro area HICP inflation in June was recorded at 0.2% yoy compared to 0.3% yoy in May. The core reading came in at an expected 0.8% yoy slightly down from 0.9% yoy in May. On the details, energy prices fell from -4.8% yoy in May to -5.1% yoy in June, cutting 3bp from the headline with food prices at 1.1% yoy compared to 1.2% yoy in May, cutting 2bp. 

Prices of non-energy industrial goods rose from 0.2% yoy to 0.3% yoy, adding 3bp while the prices paid for services retreated somewhat from 1.3% yoy to 1.1% yoy, cutting 9bp. The largest upward impact to euro area inflation came from restaurants & cafes (+0.09pp), tobacco and rents (+0.07pp each), while fuels for transport (-0.38pp), heating oil (- 0.17pp) and gas (-0.07pp) had the largest downward impact. 

Looking ahead, we expect euro area HICP inflation to average 0.3% in 2015 and 1.5% in 2016, while the core metric should remain stable at 0.8% in 2015 and 1.1% in 2016.