German inflation printed 6% for November, giving me carte blanche to recycle my somewhat wry take on the situation.
It wouldn’t be too much of a stretch to suggest that headline writers and financial media outlets are pleased to see prices accelerating in the world’s fourth-largest economy.
After all, headlines about spiraling price pressures in Germany make for great click fodder — “Weimar,” and such. For folks outside the polite world of mainstream financial coverage, it’s an excuse to use those old photos of paper money in wheelbarrows.
The figure (below) tells the story. At 6% YoY, the harmonized gauge came in hotter than expected. Consensus was looking for 5.5%. The highest estimate, from two-dozen economists surveyed, was 5.9%.
The national gauge rose 5.2%, also more than anticipated and the highest since 1992.
The data came on the heels of similarly elevated readings for Spain. The preliminary euro-area print is due later this week.
Isabel Schnabel attempted to calm frayed nerves. Inflation, she said, will fall back towards 2% in 2022 and the ECB believes November was the peak. It would be a mistake, she told ZDF Morgenmagazin, to raise rates prematurely. Tightening policy right now wouldn’t alter the inflation situation, but could conceivably increase unemployment, she cautioned.
For what it’s worth, prices fell 0.2% MoM on the national gauge, although that was just half of the expected decline. The harmonized gauge posted a 0.3% monthly gain. Economists were looking for a small drop.
ING’s Carsten Brzeski channeled the Pixies. “After today’s inflation data, many Germans might also think of their national devil: Inflation,” he wrote, before adopting a more benign cadence. “As shocking as the headline number might be, the drivers of this surge should be well-known by now,” he said, adding that “the base effect from the VAT reversal will disappear and alone should bring headline inflation down by more than 1 percentage point [while] other one-off factors like base effects from higher energy prices and post-lockdown price mark-ups will also gradually start to abate.”
Still, it may be late next year before headline German inflation falls back to 2%. That means your “best” wheelbarrow jokes are nowhere near their sell-by date.
One thing I find interesting is the cultural memory in Germany and how strong/long it is as a opposed to the US where we collectively can’t seem to understand basic facts let alone remember those facts.