Inflation provisionally accelerated again in December. A 0.3 percent monthly rise in consumer prices lifted their annual rate from 0.5 percent in mid-quarter to 0.6 percent, its highest level since May 2014.
The HICP followed a similar pattern, also gaining 0.3 percent versus November for a 0.8 percent annual rate, up from 0.7 percent last time.
However, the overall acceleration was essentially just attributable to stronger gains in the more volatile sectors. Hence, within the CPI the yearly rate more than doubled in both energy (to 4.3 percent) and food (to 0.7 percent), the latter boosted by a particularly sharp jump in fresh produce (5.5 percent after 2.2 percent). More significantly, inflation in services dipped a tick to 0.9 percent while deflation in manufacturing rose ominously to 0.9 percent from 0.6 percent.
Consequently, today's headline data are misleadingly firm and mask a weaker underlying picture. The real economy may have picked up some momentum last quarter but, in what remain extremely tight product markets, it will probably need to grow sustainably faster to have any meaningful impact on consumer prices.