Using flash estimates for Euro Area HICP. US inflation m/m, q/q falling:

Figure 1: US m/m annualized CPI headline (black), HICP headline (gray), Euro area (teal). Euro area July is flash estimate. HICP seasonally adjusted using X-13, log transformation. NBER defined peak-to-trough recession dates shaded gray. Source: BLS, EuroStat, via FRED, and author’s calculations.

This is true using 3-month changes in the monthly data, as well.

Figure 2: US q/q annualized CPI headline (black), HICP headline (gray), Euro area (teal). Euro area July is flash estimate. HICP seasonally adjusted using X-13, log transformation. NBER defined peak-to-trough recession dates shaded gray. Source: BLS, EuroStat, via FRED, and author’s calculations.

Here’s the month-on-month annualized differential between US CPI and EA HICP.

Figure 3: US_Euro area m/m annualized headline differential (black). Euro area July is flash estimate. HICP seasonally adjusted using X-13, log transformation. NBER defined peak-to-trough recession dates shaded gray. Source: BLS, EuroStat, via FRED, and author’s calculations.

While headline rates have converged, core differentials would show a different story. Energy is a bigger component of headline in the Euro area. Expect this divergence to continue as long as energy (particularly natural gas) prices remain elevated relative to the US.

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