It may come at a time where we already got the Eurozone estimate for January consumer price inflation and also saw the ECB monetary policy decision already last week. However, the release today could set the tone for markets amid the focus on economic data and also validate or invalidate the outlook by ECB policymakers heading into March.
For some context, the delay in the CPI report was supposedly due to "technical problems" as noted here last week. However, Destatis is actually reworking its methodology for calculating consumer price inflation with 2022 spending patterns set to be more strongly accounted for.
That means energy prices is more likely to be weighted more heavily, as we already saw happen with the Spanish report last week here - which was also reworked in a somewhat similar fashion. The question now is whether Destatis will adopt such an approach, but one can expect the report today to not be a straightforward one.
Adding to that is also uncertainty surrounding the latest government subsidies on energy prices. As a reminder, Germany is paying December's monthly gas bill for all households and small- to medium-sized businesses as part of a phased two-stage cap on energy prices.
How that will play into the inflation numbers will depend on how Destatis wants to book it essentially. That is because there is a part of the subsidy that will be backdated until March this year instead. The details:
"From March 2023 to the end of April 2024, private households would pay €0.12 per kilowatt hour for the first 80% of last year’s use of gas. Industry, meanwhile, would from 1 January 2023 until end of April 2024 pay €0.07 per kilowatt hour for the first 70% of last year’s use."
The estimate today for German CPI is to increase to 8.9% y/y, up from 8.6% y/y in December. But if anything else, don't expect the reading to be a simple and easy one to work out.
