As expected, inflation fell in September, not only the general rate but also the underlying rate, which experienced a sharp drop from 5.3 to 4.5%. The base effects of last year’s government support ended, which was the main reason for the decline, but the good news is that the sharp decline was more than expected, as current price developments have become more benign. Using our own seasonal adjustment, non-energy industrial goods inflation was negative month-on-month in September. Services inflation may have increased month-on-month and remains high, although service sector companies indicate that pricing power is declining as demand for services weakens.
There are currently large differences between countries, driven largely by how energy translates into consumer prices, but also by differences in wage growth and economic performance. Spain saw inflation rise from a low base due to rising energy prices, while Germany, the Netherlands and Belgium saw sharp declines.