Euro area CPI revised a tad higher for January

The cost of living in the euro area fell a bit a more slowly at the start of 2023 than previously thought.

According to Eurostat, the single currency block's Consumer Price Index declined at a month-on-month pace of 0.2%.

That brought the annual rate of increase lower from 9.2% in December to 8.6% for January (Preliminary: 8.5%).

It was a similar story at the core level, which excludes food, energy, alcohol and tobacco with year-on-year core CPI printing at 5.3% (Preliminary: 5.2%) , against 5.2% in the month before.

In comparison with the month before, processed food, alcohol and tobacco increased by the most, rising by 1.5%, while energy prices gained 0.6%.

Prices for non-energy industrial goods on the other hand fell by 1.9% and those of services by 0.1%.

"Looking ahead, our forecasts imply that headline inflation is now falling steadily. We have the HICP rate at 5-to-6% by mid-year, and at 2.5% by year end. This shift is mainly due to lower energy inflation, and in the second half of the year, falling inflation in food, alcohol and tobacco and the core, too," said Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics.

"That sounds great for bond markets, but it isn’t. The near-term outlook for core inflation is ugly. Core inflation will climb further in coming months, and we see a risk that it could hit 6% by March, and we now think it will remain at 5% or higher through July."