Wednesday, December 13, 2023 5:27 AM EST
Price pressures fell more than expected in November, as inflation reached 6.7%, below our 7.3% estimate. We are adjusting our year-end forecast to 6.7% but still keep our 2024 year-end forecast of 4.7% on the back of strong wage data.
Inflation outlook - core to continue to remain above headline
(Click on image to enlarge)
Looking at the breakdown, the downside surprises were broad based, with monthly declines in food and non-food items, as well as a weaker-than-expected pick-up in services inflation. At a more granular level, fuel and energy applied the strongest downward pressure, complemented by a few other noticeable dips like basic food items and airfares. We adjust our 2023 year-end forecast to 6.7% but still keep our 4.7% 2024 year-end forecast. While today’s inflation data surprised positively, wage data for October shows a strong, private-driven wage growth of 17.1% (Q3 average: 14.9%). We believe that persistent wage growth is here to stay.
While the impulse from the private sector might not continue to be as strong into 2024, given a higher fiscal burden, minimum wage increases and public sector workers’ demands during the big electoral year will continue to add support to wage-driven inflationary pressures. As such, we are reluctant to extrapolate the current disinflationary trend to 2024 inflation.
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Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...
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