European Economic Perspectives: European inflation monthly: July preview

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European Economic Perspectives: European inflation monthly: July preview

xpect the increase to be driven solely by a pick-up in

energy inflation amid a 13% increase in household utility bills (gas and electricity), while

core inflation is likely to ease and food inflation to remain unchanged. More specifically,

we forecast energy inflation to rise by 7.2pp to 12.9% y/y, with higher utility bills more

than offsetting a likely decline in fuel prices. In contrast, we expect core inflation to fall

by 0.2pp to 2.4% y/y, driven by a 0.3pp decline in services inflation to 3.3% y/y, helped

by an unwinding of strength in volatile transportation and accommodation services in

June. We think goods inflation, meanwhile, is likely to edge up by 0.1pp to 0.8% y/y.

Following three consecutive monthly declines, we expect food inflation to remain

unchanged at 1.8% y/y.

Swiss CPI: Headline -0.1pp to 0.4% y/y

After declining by 0.1pp to 0.5% y/y in June, we forecast headline inflation to edge

down by another 0.1pp to 0.4% y/y in July (out on 3 August). However, on an

unrounded basis, we anticipate only a very small decline from 0.45% y/y to 0.44% y/y.

The main drag in July is likely to be energy inflation, which we expect to decline by 1.5pp

to 3.5% y/y. In contrast, core inflation (our definition - headline excluding energy and

food) is likely to edge up by 0.1pp to 0.6% y/y), while food inflation is likely to remain

unchanged at -1.2% y/y.

Swedish CPIF: Headline and core down to 0.7% and 0.3% y/y

After a modest upside surprise at low levels in June, July inflation (out on 6 August) will

likely see a renewed fall due to the second fuel tax cut and halving of transport season

tickets. Based on electricity futures until 22 July, we expect headline CPIF to decline