Inflation tracker: Inflation remains on a downward trend, except for the United States

Despite the rebound in the United States, inflation continues overall to slow in the G7 countries and in the euro area as a whole. In Japan, keeping consumer prices above 2% will remain complicated in the short term, due to the loss of momentum observed this winter: inflation rebounded in February due to base effects, but the 3m/3M annualised rate fell back to 1.3%. The decline in the 3m/3m annualised rate is more marked in services, down to only 0.4%. The wage increase granted following the annual wage negotiations (Shunto): 5.3% in total, including 3.7% in base salary, will nevertheless support the BoJ in its (very gradual) attempt to normalise monetary policy. The cash earnings data (page 27) have indicated an acceleration since the beginning of the year, which most certainly reflects the early outcome of the wage negotiations.
In the United States, the seasonally adjusted monthly increase in prices in services has gained momentum in recent months pushing the 3m/3m annualised rate to the highest level since November 2022, at 6.5%. Excluding shelter, services inflation jumped 0.8 percentage points in March to 4.8% y/y. The spectacular increase in the cost of motor vehicle insurances, unseen for more than 45 years, contributes in itself to 0.6 percentage points of inflation. However, shelter remains the main driver of inflation in the country, contributing for more than half (2.1 pp) to the total increase. Deflation on new and used cars helps limit the rise in headline inflation, albeit to a lesser extent for used vehicles compared to previous months.

On the other hand, inflation continues to decline in the euro area, with inflation expected to fall temporarily below 2% in the second quarter, in line with our forecast. The ECB will also take note of the general decline in alternative inflation measures (page 9), which are now close to or below 3%. On a year-on-year basis, the harmonised index of prices in the euro area fell by 0.2 points to 2.4% in March, according to Eurostat's preliminary estimate. A third of member States recorded inflation below 2% last month. The persistent deflation of producer prices, and in particular the index excluding construction and energy, is a further sign of the decline in price pressures. However, there have been some unfavourable developments: inflation in services has not fallen for five months.

In the UK, the CPI fell back below 4% y/y in March for the first time in two-and-a-half years, while core inflation fell 0.5 percentage points to 4.5%. However, there are still significant discrepancies between items in the consumer price index, which explains the very limited improvement in chart showing the degree of generalisation of inflation (page 13). Deflation on durable goods intensified (-1.7%), the one on energy fell slightly but remained high (-13.8%), while inflation in services was still slow to fall more significantly (+6.1%). The decline in the latter remains limited due to the strong dynamism of wages.

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