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Aline Schuiling, senior economist at ABN AMRO, points out that the Eurozone HICP inflation for April will be published on Friday with large number of individual countries already publishing data over the past couple of days, most importantly Germany.

Key Quotes

“Headline inflation in Germany jumped to 2.1%, up from 1.4% in March. The regional detailed inflation reports that were published earlier this week revealed that the rise in inflation was almost entirely due to the volatile package holidays component, which jumped to +11.2% yoy in April, from -6.4% yoy in March. This jump contributed around 0.5pp to the total 0.7pp rise in inflation, with the rest mainly resulting from a temporary shift in discount sales of clothing and shoes.”

“The impact of Germany’s package holidays was also underlined by the inflation rates that were published in other countries, such as France, Italy and Belgium which all increased by merely 0.1pp in April. Finally, in Spain, inflation increased more noticeably (to 1.6% from 1.3%), but according to a written statement by Spain’s statistical office, this was also due to an increase in the prices of tourist packages. Given Germany’s heavy weight in the eurozone aggregate, eurozone inflation is also expected to rise.”

“We expect the headline rise from 1.4% to 1.6%, and core inflation to rise from 0.8% to 1.0%, although the risks look tilted to the upside. Looking forward, we expect core inflation to remain close to 1.0% throughout this year and to pick up modestly next year.”