Today I talk about US inflation and Eurozone industrial production numbers.
US December inflation: headline, up 0.5% mom sa, but the real headline is that unadjusted, the index was up 7% yoy, with a monthly rise 0.9SDs above historic seasonal trends. That's actually a bit of a relief from the 1.7SD deflection in November, and the 2.1SD deflection in October. But hold the celebrations: this is is probably not yet, quite, the peak of likely yoy: that's probably coming in February, when we can expect it at around 7.1% to 7.3% yoy.
Ex-out food and inflation, and core CPI rose 0.6% mom sa, and before adjustments was up 5.5% yoy, with a monthly movt also 0.9SDs above trend. Sequential inflation pressure has moved out from energy and food into the broader inflation this core index this measures. If current trends continue, its another three months before this peaks, and in the meantime we can expect to see it flirting with 6%.
Its now unrealistic to expect CPI to really retreat very much on its own: if the break above trend of the last six months is continued, you can expect 1Q at 7.2%, 2Q at 6.3%, 3Q at 5.9% and 4Q at 5.4%. There's no likely scenario which would take CPI back to the 2% level which was the average of the last 10yrs. In the meantime, although bond yields have risen to the dizzying heights of 1.75%, that's still 3.7pps below what we can reasonably expect inflation to be showing in 4Q22.
On to Eurozone industrial production. Around the turn of the year, you can expect index series to get rebased every so often, using new weighting of items, sectors or countries. But if the index is rebased from, say, 2015 to 2020 weightings, you get told. There was no such explanation for what happened to the Eurozone's industrial production series today. Rather, what we got from Eurostat was a completely unexplained, and sharply material, revision of an absolutely central series.
For the record, it showed November's output up 2.3% mom, which was way better than one could expect from what we already knew (Germany had already reported production down 0.2% mom and France down 0.4% mom). What appears to have swung it was Ireland, where output was reported up 37.3% mom but down 30.4% yoy. Really.
But the whole series was made anew - all new numbers - and this new series materially alters what we thought we knew. To give simply the latest number: the new series says output fell 1.3% mom in October, whilst the old series reported a 1.1% rise. Overall, between Nov 2020 and Oct 2021, we used to be told that output rose 0.6%; the new series tells us it actually fell by 3.4%. You can't just slip that sort of revision in without explaining what happened. So I've asked Eurostat about it, but have no answers yet.
