French, German HICP inflation likely to rise slightly in 2016

France's flash HICP inflation is expected to remain flat at 0.3% y/y in January, according to INSEE.  The energy component will continue to be weak and is expected to witness a slight rebound on a yearly basis. Meanwhile, food prices are likely to weaken slightly.  Industrial goods services and non-energy in the core component are likely to be steady. The overall core component is expected to remain stable in January at 0.8% y/y. The French HICP inflation is expected to average 0.6% in 2016 and 1.6% in 2017.

"We expect the core metric to be 1.0% in 2016, before rising to 1.3% in 2017", says Societe Generale.

Meanwhile, Germany's flash HICP is likely to be 0.4% y/y in January, as compared with 0.2% y/y in December. The expected rise in the headline component might take place mainly due to positive base impact from the energy component, while food prices are expected to fall in January. The core component is expected to be steady at 1.1% y/y.

"We expect German HICP inflation to average 0.7% in 2016 and 1.7% in 2017, while the core metric should average 1.3% in 2016 and 1.4% in 2017", says Societe Generale.