Inflation was surprisingly low in October. Provisional results showed the CPI unchanged from its final September level to shave a couple of ticks off the annual inflation rate which now stands at 1.6 percent. This was its first decline since May.
The flash HICP painted a still softer picture, falling 0.1 percent on the month to reduce its yearly rate from 1.8 percent to just 1.5 percent.
One factor weighing on the change in annual CPI inflation was energy where the rate dropped from 2.7 percent to 1.2 percent, a 3-month low. Food (4.3 percent after 3.6 percent) moved in the other direction. Elsewhere, prices were generally quite weak. Hence, inflation in overall goods dropped 0.3 percentage points to 1.9 percent and in services decreased a sharper 0.4 percentage points to only 1.2 percent. Rent, excluding utilities was also a tick lower at 1.6 percent.
The unexpected weakness of today's German price data make for some downside risk to tomorrow's flash Eurozone inflation report. Any decline here would hardly please the ECB but, in the wake of President Draghi's comments last week, neither would it come as much of a surprise. So long as the core measures behave themselves, the central bank should not be too concerned but, on the basis of this release, there would seem to be downside risk here too.