Italian HICP inflation printed at -0.1% yoy in April after its 0.0% yoy March reading. The energy component rose from -6.5% yoy to -5.9% yoy, adding 6bp to the headline figure. Food prices rose, mostly due to an increase in tobacco prices, adding 2bp. The end of the winter sales period added extra upward pressure, especially in the clothing and footwear component. The services variable fell from 0.4% yoy in March to 0.3% yoy in April, cutting 4bp from the headline figure. The May reading is expected to show further signs of a tepid rebound in the energy component, as both fuel and electricity prices rose by a small amount. Soft data surveys show some strength in the Italian services sector, and this, in combination with rising consumer confidence and job creation in the services sector increasing at the fastest level since November 2007, should provide a lift to the core components. “We expect Italian HICP inflation to average 0.4% in 2015 and 1.6% yoy in 2016. The core component should average 0.7% in 2015 and 1.1% in 2016”,says Societe Generale.
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