Eurozone Inflation Accelerates in May to New Records, Follows German and Spanish CPI

Eurozone May CPI numbers came in much higher than expectations released Tuesday confirming the soaring German and Spanish inflation reports released the day prior. Energy and food pricing pressures continue to elevate around the world. Eurozone May preliminary CPI +8.1% was versus +7.7% y/y expected. Core CPI +3.8% was higher also +3.5% y/y expected.

Germany’s consumer inflation for May was 8.7% from a year ago and the highest reading since German reunification. Analysts predicted 8.1%. advance. Spain’s May CPI also soared to +8.7% y/y vs +8.3% expected. The ECB meet in 10 days where they are set to announce the conclusion of large-scale asset purchases and confirm plans to raise interest rates in July for the first time in more than a decade.


  • Eurozone May preliminary CPI +8.1% vs +7.7% y/y expected
  • Latest data released by Eurostat – 31 May 2022
  • Prior +7.4%
  • Core CPI +3.8% vs +3.5% y/y expected
  • Prior +3.5%
  • Energy prices continue to record the biggest increase (39.2% vs 37.5% in April)
  • Food, alcohol and tobacco (7.5% vs 6.3%),
  • Non-energy industrial goods (4.2% vs 3.8%)
  • Services (3.5% vs 3.3%).
  • Excluding energy, inflation accelerated to 4.6% from 4.1%, more than the double the ECB target of 2%, in a sign price pressures in Europe remain elevated and have not peaked, strengthening the case for the ECB to start raising borrowing costs.
Eurozone CPI

Bloomberg reported that Italy’s Ignazio Visco pushed back on Tuesday against the prospect of a more aggressive rate move, saying the ECB must proceed in an “orderly” manner to avoid potential bond-market turbulence. His French colleague, Francois Villeroy de Galhau, said the latest inflation data warrant a “gradual but resolute” normalization of monetary policy.

Market Reaction

  • German bonds dropped, led by the long-end of the curve, with benchmark 10-year yields rising two basis points to 1.07%,
  • Euro continued to hold declines against the dollar, falling 0.5% to 1.0727.
  • Money markets-maintained ECB rate-hike wagers steady, pricing 115 basis points of tightening by December. With 40% odds of a 50-bps rate hike in July. That is seen up from the 110 bps priced in at the end of last week.

Earlier Preview of May Eurozone inflation data due Tuesday 31 May 2022

Euro zone inflation hit a record 7.5% in April. Stripping out energy and food costs still leaves the rate well above the ECB target. The ECB’s deposit rate is currently -0.5%,

Expectations from TD

  • Euro area headline HICP inflation are for a new series high in May at 7.8%
  • A rebound in fuel prices and continued acceleration in food inflation likely being the main drivers
  • EZ core inflation expected to soften 0.1ppts to 3.4% y/y due to weakness in the non-energy industrial goods component

Expectations from CommerzBank

  • Expects a jump from 7.4% to 8.0% in May
  • The decline in energy prices in April did not continue. More had to be paid again for all types of energy in May.
  • y/y rate of change is likely to have risen from 37.5% to 39%. This alone increases the inflation rate in May by 0.15 percentage points.
  • The inflation rate excluding energy, food, alcohol and tobacco is likely to have risen further from 3.5% in April to 3.8% in May
  • The jump in food prices is even greater. Here, the y/y rate is likely to have climbed from 6.3% to 7.3%, which in itself pushes up the inflation rate by 0.2 percentage points.

“A rapid slowdown in inflation in the euro area isn’t in sight,” said Christoph Weil, an economist at Commerzbank. “Even if there’s no interruption in Russian oil and gas supplies and if the year-on-year increase in energy prices falls significantly as the year progresses, the inflation rate will probably still be around 6% by the end of the year.”

Germany May 22 preliminary CPI +8.7% vs +8.3% y/y expected

  • German May prelim CPI +7.9% y./y vs +7.6% expected
  • Prior was +7.4% y/y
  • HICP +8.7% y/y vs +8.0% expected
  • Prior HICP 7.8% y/y
  • CPI m/m +0.9% vs +0.5% exp
  • HICP m/m +1.1% vs +0.5% exp
Record Post German Unification CPI via Bloomberg
German Monthly CPI

Latest data released by Destatis – 30 May 2022

German States May CPI

  • Saxony May CPI +8.0% y/y vs +7.2% y/y prior
  • Bavaria May CPI +8.1% y/y vs +7.5% y/y prior
  • Hesse May CPI +8.4% y/y vs +7.9% y/y prior
  • Baden-Wuerttemberg May CPI +7.4% y/y vs +7.0% y/y prior

“Consumers will have to reckon with further increases in prices because many inputs are still scarce and wholesale prices are still increasing dramatically,” ZEW Economist Friedrich Heinemann said by email. “Surprisingly good labor-market data also indicate that the dreaded wage-price spiral could soon pick up speed.”

Germany Finance

Negotiated wages in Germany fell by 1.8% in real terms in the first quarter, however workers in the iron and steel industry are pushing for gains of more than 8%, they’re unlikely to secure gains that fully offset the rising cost of living.

Spain May 22 preliminary CPI +8.7% vs +8.3% y/y expected

  • Spain Preliminary CPI +8.7% vs +8.3% y/y expected
  • Prior +8.3%
  • HICP +8.5% vs +8.2% y/y expected
  • Prior +8.3%
Spain Monthly CPI

Latest data released by the National Statistics Institute – 30 May 2022

Spanish inflation continues at an elevated level after surging at the start of the year. Spain inflation at a record 8.5% is despite government assistance including a fuel subsidy and an increase in the minimum wage. On a monthly basis, consumer prices are expected to rise by 0.8 percent, after a 0.2 percent decrease in April.

Core inflation, which strips out volatile food and energy prices, jumped up to 4.9% year-on-year in May, up from 4.4% in April. This was the highest since October of 1995, from 4.4 percent in April. Main upward pressure should come from prices of food & non-alcoholic beverages.

Source: Destatis, Bloomberg, TC, NSI

From The TradersCommunity Research Desk