How much did eurozone inflation fall in January? A slight drop in the German Harmonized Consumer Price Inflation Index to 9.2% yoy in January from 9.6% in December suggests that Eurostat may need to revise eurozone January inflation by 0.2-0.3 percentage points from with an original estimate of 8.5%. on an annualized basis when it releases its final data on Feb. 23. On February 1, Eurostat reported an unexpectedly strong drop in inflation from 9.2% in December. Due to technical problems, economic data for Germany was not available when the agency came up with preliminary figures. Overall, inflation in Germany (and the Eurozone) will fall sharply to 3% yoy by the end of the year and to 2.4% in 2024, supported by pass-through effects associated with energy price developments in 2022. Structural inflation may remain high a few more months as producers continue to pass on past growth to consumers. In recent months, the pressure on a number of inflation indicators has eased significantly.

However, there is uncertainty in the data layer. Unfortunately, this time the German Statistical Office did not provide more detailed data, apart from basic data on the inflation index. In any case, the methodological uncertainty regarding inflation figures for December 2022, January and February 2023 is much larger than usual. The state actively intervenes in the energy market related to household consumption, but it is not clear in advance to what extent this will be reflected in the data collected by statisticians. However, the Harmonized Consumer Price Index (within the EU) is a measure that makes inflation performance comparable across the euro area. According to the national consumer price index, German consumer price inflation rose to 8.7% year on year in January from 8.6% in December. The two inflation measures use different weighting schemes and calculation methods. Without detailed data on individual components and new index weights for this year, it is difficult to determine the cause of the discrepancies between European and national inflation figures.

* Mr. Salomon Fiedler is an economist at the investment bank Berenberg Bank.