Coming up from the US Friday morning - July inflation figures - preview

Author: Eamonn Sheridan | Category: News

July CPI due from the US at 1230GMT on Friday 11 August 2017

Previews from ...

Deutsche Bank:
  • As recent Fed statements have emphasized, policymakers will be monitoring near-term inflation trends closely. Hence, an in line print would provide tentative evidence that the recent downshift in core inflation may be behind us.
  • ...  we do not expect headline inflation to bottom out in year-over-year terms until Q1 of next year. However, we see year-over-year core inflation readings remaining near their recent levels through 2017 and into the early months of 2018.
  • We expect June headline CPI to have increased 0.2% m/m (a soft two-tenths increase) and 1.8% y/y.
  • We forecast core CPI to have increased 0.2% m/m (a soft two-tenths increase) and 1.7% y/y.
  • While we see a number of transitory factors pushing CPI lower recently, such as wireless communication prices and prescription drug prices, we are also concerned by the continued decline in core goods prices, particularly for used vehicles and apparel. In addition, we see two-sided risks related to shelter inflation for the first time in the recovery, as the steady upward trend in this series seems to have come to a halt.
  • Overall, we expect some of the headwinds for inflation to abate by early to mid-2018 and, as a result, forecast that CPI will gradually pick up.
  • The core CPI has fallen short of consensus expectations for the past four months. This streak may end in July, as we forecast a 0.17% rise in the core CPI, rounding up to 0.2%. We expect the y-o-y rate of core CPI inflation to hold steady at 1.7% (very close to rounding up 1.8%, according to our estimate).
  • One major reason why core inflation has softened this year has been a slowdown in the pace of increase in rents. We forecast a moderate rise in rents in July. We expect a 0.25% increase for the "owners' equivalent rent" price index and a 0.27% increase for the "rent of primary residence" index.
  • We expect the headline CPI rose 0.2% in July, with the price index for gasoline rising around 0.6%. The y-o-y rate of headline CPI inflation would rise to 1.8%, up from 1.6% in June.

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