US data due Thursday - CPI for August - what to expect

Author: Eamonn Sheridan | Category: News

A preview of the inflation data coming up 13 September 2018, 1230GMT 

  • For the August CPI report, we forecast headline CPI to increase 0.3% m/m and 2.8% on a y/y basis. 
  • For core CPI, we forecast an increase of 0.2% m/m and 2.3% y/y. 
  • Core inflation has gradually picked up this year as the drag from core goods has diminished and core services inflation has ticked higher. We expect the US economy to continue to grow at an above-trend pace and spare capacity in the economy to be utilized over time. This should lead to a modest overshoot of inflation above the Fed's 2% target.

  • Consumer prices should seem a touch firmer in August. In part, we look for medical prices (which slipped a surprising 0.2% in July) to rebound firmly on the month. Energy should provide an additional boost to the headline, as gasoline prices advanced well ahead of their seasonal norm. 
  • All in, we expect headline CPI to come in at 0.4% while the core should post a robust 0.3% advance. This would leave the y/y rates unchanged at 2.9% and 2.4%, respectively.
  • We expect a solid 0.3% (0.256%) m-o-m increase in core CPI for August following a 0.243% gain in July. 
  • On a 12-month change basis, core CPI inflation should remain steady at 2.4% (2.367%) compared to 2.354%, previously. 
  • We expect rent-related items (regular rent and homeowners' equivalent rent) to continue to support core CPI inflation. Core goods price inflation, however, was soft in July partly due to idiosyncratic declines in some components. …   Together with the reversal of previous month's idiosyncratic declines of some volatile prices, persistent components will support a solid reading of core CPI in August. 
  • Beyond the August report, we maintain our medium-term view that core CPI inflation should remain slightly above the FOMC's 2% target.

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