Is the Jump in Eurozone CPI Inflation Real?

The CPI inflation surged in Europe in january, but it looks suspicious

Skerdian Meta•Wednesday, February 3, 2021•1 min read

Inflation started weakening in February last year when the coronavirus broke out in China, sending the Chinese economy into recession in Q1, which hurt the demand for oil, sending prices lower. The lockdowns that followed in the rest of the world sent it down even further, and since August, the CPI (consumer price index) inflation has been negative. But, today we saw a surprising jump in the CPI for January, which is great, but it also looks suspicious, because it’s such a big spike, as shown in the chart above.

Eurozone January Preliminary CPI Report

January preliminary CPI YoY +0.9% vs +0.6% expected
December CPI was -0.3%
January Core CPI YoY +1.4% vs +0.9% expected
Prior core CPI was +0.2%

The core reading has jumped to its highest level in five years, as the figures here by far beat the estimates, surprisingly to the upside. That said, things must be put into context.

As mentioned here, this shouldn’t change anything in terms of the ECB outlook, as the jump in inflation can be attributed to a host of special circumstances at the beginning of the year. In any case, we can also expect more volatility to follow in the numbers in the coming months.

Eurozone December PPI Report

December PPI MoM +0.8% vs +0.7% expected
November PPI MoM was +0.4%
December PPI YoY -1.1% vs -1.2% expected
Prior PPI YoY was -1.9%

Producer prices picked up further towards the end of last year, and while that is a positive development in terms of price pressures, this is very much a lagging data point.

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Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.