Consumer prices held up rather better than expected this month. A provisional 0.2 percent monthly decline was less than half the expected fall and, combined with favourable base effects, enough to lift the annual inflation rate by fully 0.8 percentage points to 1.4 percent, equalling its highest mark since October 2012.
The flash HICP followed suit, also posting a 0.2 percent drop versus November for a 1.6 percent yearly gain, double the mid-quarter rate.
The acceleration in the yearly CPI rate in large part reflected the strength of food (1.3 percent after 0.7 percent) and, in particular, energy (10.0 percent after 4.3 percent) where higher oil prices combined with a hike in taxes on petroleum products. Overall manufactured goods inflation climbed from minus 1.0 percent to minus 0.3 percent while services saw a smaller 0.2 percent increase to 1.1 percent.
Today's headline data are misleadingly firm and the core index will look notably softer when the final report is released next month. Still, if rising actual inflation can boost households' inflation expectations, there may be room for underlying prices to start firming too. Certainly, this is what the ECB will be hoping.