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Editor's Note: Below is a note written by Hedgeye editor Eric Wallerstein and Junior Macro analyst Ryan Ricci. For more insights like this, sign up for our free Weekend Reading newsletter. |
December Germany Wholesale Prices fell yesterday for the first time in 10 months, decelerating to +16.1% year-over-year versus the prior +16.6%. One input fueling the decline was mineral oil products. It tanked on a sequential basis to +50.6% from the prior +62.4%.
Critically, Wholesale prices have a 0.71 correlation to German CPI (which is sitting at a cool +5.3%, rising from 1% in January 2021 and full on deflation throughout the second half of 2020.)
While that level is still sticky-high, any deceleration is welcome here as Germany and the broader Eurozone "combat" (well, they're not really putting up much of a fight) rapidly rising prices across the economic spectrum.
This print comes on the back of Joachim Nagel's first speech as President of the German Bundesbank, where ECB President Lagarde pleaded with the Eurozone to "trust her and her unwavering commitment to maintaining price stability." (We discussed Lagarde's comments and the response by the German Bund yield curve yesterday in "'Trust Us' | Lagarde Pleads As Eurozone Curves Steepen.")
Don't confuse those words as hawkish.
Lagarde has reiterated her "unwavering commitment" to maintaining QE forever and not raising rates ad nauseum. With the ECB committed to easy money, German long-dated yields may even touch positive for the first time in several years.
Welcome to the ECB, Governor Nagel.
