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Synopsis: Goldman Sachs outlines its expectations for the upcoming U.S. Consumer Price Index (CPI) revisions by the Bureau of Labor Statistics (BLS), focusing on the recalculated seasonal factors for 2023. The annual revision process typically adjusts monthly inflation figures towards the annual average, with higher inflation readings generally revised lower and lower readings adjusted higher. Based on historical trends, Goldman Sachs predicts minor revisions in monthly core CPI inflation for the second half of 2023, reflecting the sharp inflation slowdown over the year.

  • Revision Process: The BLS's annual revisions aim to reflect accurate price changes by recalculating seasonal factors, affecting monthly inflation readings.
  • Historical Trend: Approximately 20% of a month's relative strength in initial core inflation readings has been revised in its first annual revision over the last decade.
  • 2023 Inflation Trend: With inflation decelerating significantly throughout 2023, monthly core CPI in the latter half of the year was 0.06 percentage points below the annual average.
  • Projected Revisions: Goldman Sachs estimates that if 20% of the deviation in 2023H2's monthly core CPI is revised, the figures could be adjusted approximately 0.01 percentage points higher on average, translating to a 0.15 percentage point annualized basis adjustment.
  • Core PCE Inflation Revisions: Similar directional revisions are expected for core Personal Consumption Expenditures (PCE) inflation for 2023Q4, albeit to a lesser extent, given that not all PCE components use CPI seasonal factors.

Conclusion: Goldman Sachs anticipates minor revisions to the monthly core CPI inflation figures for the second half of 2023, aligning with the historical pattern of annual adjustments. These revisions are expected to reflect the significant slowdown in inflation experienced over the year, with a slight upward adjustment on average for the latter six months. The analysis also suggests smaller magnitude revisions for core PCE inflation, highlighting the nuanced impact of recalculated seasonal factors on different inflation measures.

The data is due at 8.30 am US Eastern time (1330 GMT).

Federal Reserve Chair Powell is on the edge of his seat: