UBS Economics-European Economic Perspectives _Eurozone Inflation likely s...-118964863

ab20 November 2025Global ResearchEuropean Economic PerspectivesEurozone: Inflation likely stable in NovemberMarginal progress in underlying inflation in OctoberThe final Eurozone HICP inflation estimate for October (published on 19 November) confirmed the 0.1pp decline in headline inflation to 2.1% y/y and unchanged core inflation at 2.4% y/y. On balance, developments in underlying inflation were positive with the majority of measures (marginally) easing in October. More specifically, supercore, trimmed means, domestic inflation and exclusion measures were either stable or a touch lower, while PCCI ticked up (Fig. 1). The breadth of inflation narrowed with the share of items seeing price increases above 2% falling 2pp to 49% (Fig. 7). The monthly increase in (nsa) services inflation excluding travel-related items was the same as last year (Fig. 13). The sequential monthly run-rate was up in services (+0.2pp to 0.4% m/m swda) but down in goods (-0.1pp to 0% m/m swda) (Fig. 9). As a result, the annualised 3m/3m rate of seasonally adjusted inflation jumped up for services (+0.8pp to 3.7% y/y) but fell for goods (-0.3pp to 1% y/y) (Fig. 12). Inflation expectations were largely unchanged with the exception of a tick-down in 1-year consumer expectations. Developments on the wage front have remained positive with our monthly tracker of Eurozone negotiated wages (excluding one-offs) pointing to 3.8% y/y in September and October, down from 4.4% in June and 4% in July (Fig. 25). We also expect the ECB's negotiated wage indicator (incl. one-offs) to show a large decline from 4% y/y to 2.1% in Q3, largely due to declines in German wage growth including one-offs. Outlook for November: Headline and core stable at 2.1% and 2.4%, respectivelyWe forecast November Eurozone inflation (out on 2 December) to remain unchanged at 2.1% y/y. However, we see upside risk to our estimate given that our unrounded forecast is 2.149%. At the component level, we expect a pick-up in energy inflation to be offset by lower food inflation, while core inflation is likely to remain unchanged (at 2.4% y/y). More specifically, we forecast energy inflation to increase 0.3pp to -0.6% y/y, while food inflation is likely to ease 0.1pp to 2.4% y/y. Within core inflation, we expect goods inflation to remain unchanged at 0.6% y/y, while services inflation is likely to rise by 0.1pp to 3.5% y/y. We expect the increase in services to be largely driven by the pick-up in services inflation in Germany (+0.5pp to 4.1%), where despite discounting in travel and accommodation related services, lower weights of those components compared to last year imply a smaller drag on aggregate services. At the country level, we expect inflation to increase in Germany (+0.3pp to 2.6% y/y) and France (+0.2pp to 1% y/y). In contrast, inflation is likely to fall in Italy (-0.1pp to 1.2% y/y) and Spain (-0.2pp to 3% y/y) and remain unchanged in the Netherlands (at 3% y/y). ECB rates on hold for foreseeable future Wit