Accounting for Changes in Seasonality, Turnleaf Adjusts Eurozone Core CPI Upwards

Clothing and footwear in the Eurozone have historically exhibited strong seasonality, with substantial January price drops due to winter sales. However, post-COVID and amid rising inflationary pressures, the amplitude of price fluctuations has narrowed, resulting in smaller absolute price changes. Since 2022, December price dips have become steeper, driven by improved weather conditions and an influx of international tourists increasing pre-holiday demand. This shift has led to lower stock availability in January, reducing the depth of discounts typically seen during winter sales. In Spain and Italy, retailers have strategically limited January markdowns (rebajas/saldi) to minimize inflationary impacts, further dampening traditional seasonal effects.

Comparing Spanish January price trends to off-peak months like October, the shift is evident, as October remains stable while January discounts have weakened post-2021. Local reports in Spain highlight that “[winter] sales aren’t what they used to be,” reinforcing this trend. As a result, inflation in January may be underestimated if these evolving seasonal patterns are not accounted for in economic models.

Turnleaf predicts that as inflation subsides, price increases and decreases will continue to be moderate, reflecting a new equilibrium with less dramatic price swings. Given Spain’s significant role in Eurozone inflation trends, its ability to contain inflation through controlled discounting is influencing broader seasonal pricing dynamics across the region. As a result, Turnleaf has decided to apply an upward adjustment to its forecasts to reflect evolving seasonal trends in the Eurozone. Particularly, we have been closely monitoring winter sales data since the last forecast at the beginning of January 2025 before making any adjustments.