- July consumer price growth poised for monthly rise - Downward energy price pressures forecast to abate - Core gauge expected to move lower - PPI set for release Tuesday at 08:30 EST/12:30 GMT - CPI data due Wednesday at 08:30 EST/12:30 GMT
A slight reversal in energy costs is forecast to lift the monthly rate of consumer price growth for July, experts said ahead of Wednesday’s latest report.
The US Bureau of Labor Statistics is set to release both PPI and CPI data this week. But investors will also be deluged by the latest US retail sales data, industrial production, and the preliminary University of Michigan Sentiment survey.
An economists’ poll predicted that headline CPI will rebound to 0.2% m/m from -0.1% previously. Annually, prices are estimated to have held steady at 3.0%. Core CPI is forecast to have slowed slightly to 3.2% y/y from 3.3%, last month.
On Monday, the New York Fed’s consumers’ three-year-ahead inflation expectations fell 0.6 percentage points to 2.3% in July, representing a new series low.
Analysts noted that the energy component of price growth calculations will no longer provide meaningful relief to the headline rate, and food inflation is expected to move sideways.
JP Morgan noted a material positive shift in the risk profile on the US inflation backdrop “as strong supply-side performance combined with moderating labour demand to produce a significant easing in labour market conditions.” It said US wage inflation was now slowing in a manner not seen in other developed market economies. “Combined with sustained solid productivity gains, US unit labour costs have realigned to a level broadly consistent with the Fed’s inflation target.”
Underlying costs
As always, it will be within the core measure that many will look to for signs of a sustainable cooling of cost pressures.
Last month, core CPI rose 0.1% m/m and 3.3% y/y, with both rates a tenth below forecasts and prior marks. The annual figure represented the smallest 12-month increase in that index since April 2021.
The so-called “supercore” sub-index, which excludes shelter and rent costs from the services reading, slipped to 4.651% y/y in June from 4.804% in May.
Deutsche Bank’s Justin Weidner said following the sharp deceleration in rental inflation, much of the focus will be on whether the more normal prints in the June data will repeat themselves.
“Given that the regional rent data did not seem to exhibit any anomalies, and leading indicators are constructive, we expect that to be the case, with both primary rents (0.25% versus 0.26%) and OER (Owners Equivalent Rent) (0.27% vs. 0.28%) to continue to grow at something closer to pre-pandemic rates. If this happens, it would likely give the Fed enough confidence on the inflation front to begin to signal more clearly about a cut at the September meeting.”
Markets look to Fed officials for guidance
As is typical during summer months, there is a sparsity of central bank speakers, but we expect to hear from several this week.
Atlanta’s Raphael Bostic (voter) is set to speak on Tuesday at a moderated discussion following PPI data. “Having long held to a view that the Fed should cut rates only once this year, we will look to gauge how recent data – particularly the softer-than-expected July jobs report – may have pushed him in a more dovish direction,” Weidner noted. “Similarly, an appearance by St. Louis’s Musalem (non-voter) on Thursday will provide another opportunity to gauge how a hawkish-leaning official has adjusted his views, if at all, in response to recent developments.”
Patrick Harker and Austan Goolsbee are also due to speak later in the week.
However, Fed Chairman Jerome Powell may be left to offer some of the latest information at the annual Jackson Hole Economic Symposium near the end of the month (24-26 August).
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- July consumer price growth poised for monthly rise
- Downward energy price pressures forecast to abate
- Core gauge expected to move lower
- PPI set for release Tuesday at 08:30 EST/12:30 GMT
- CPI data due Wednesday at 08:30 EST/12:30 GMT
By Harry Daniels
LiveSquawk News
@HarryDaniels71
12 August 2024 | 18:00 GMT
A slight reversal in energy costs is forecast to lift the monthly rate of consumer price growth for July, experts said ahead of Wednesday’s latest report.
The US Bureau of Labor Statistics is set to release both PPI and CPI data this week. But investors will also be deluged by the latest US retail sales data, industrial production, and the preliminary University of Michigan Sentiment survey.
An economists’ poll predicted that headline CPI will rebound to 0.2% m/m from -0.1% previously. Annually, prices are estimated to have held steady at 3.0%. Core CPI is forecast to have slowed slightly to 3.2% y/y from 3.3%, last month.
On Monday, the New York Fed’s consumers’ three-year-ahead inflation expectations fell 0.6 percentage points to 2.3% in July, representing a new series low.
Analysts noted that the energy component of price growth calculations will no longer provide meaningful relief to the headline rate, and food inflation is expected to move sideways.
JP Morgan noted a material positive shift in the risk profile on the US inflation backdrop “as strong supply-side performance combined with moderating labour demand to produce a significant easing in labour market conditions.” It said US wage inflation was now slowing in a manner not seen in other developed market economies. “Combined with sustained solid productivity gains, US unit labour costs have realigned to a level broadly consistent with the Fed’s inflation target.”
As always, it will be within the core measure that many will look to for signs of a sustainable cooling of cost pressures.
Last month, core CPI rose 0.1% m/m and 3.3% y/y, with both rates a tenth below forecasts and prior marks. The annual figure represented the smallest 12-month increase in that index since April 2021.
The so-called “supercore” sub-index, which excludes shelter and rent costs from the services reading, slipped to 4.651% y/y in June from 4.804% in May.
Deutsche Bank’s Justin Weidner said following the sharp deceleration in rental inflation, much of the focus will be on whether the more normal prints in the June data will repeat themselves.
“Given that the regional rent data did not seem to exhibit any anomalies, and leading indicators are constructive, we expect that to be the case, with both primary rents (0.25% versus 0.26%) and OER (Owners Equivalent Rent) (0.27% vs. 0.28%) to continue to grow at something closer to pre-pandemic rates. If this happens, it would likely give the Fed enough confidence on the inflation front to begin to signal more clearly about a cut at the September meeting.”
As is typical during summer months, there is a sparsity of central bank speakers, but we expect to hear from several this week.
Atlanta’s Raphael Bostic (voter) is set to speak on Tuesday at a moderated discussion following PPI data. “Having long held to a view that the Fed should cut rates only once this year, we will look to gauge how recent data – particularly the softer-than-expected July jobs report – may have pushed him in a more dovish direction,” Weidner noted. “Similarly, an appearance by St. Louis’s Musalem (non-voter) on Thursday will provide another opportunity to gauge how a hawkish-leaning official has adjusted his views, if at all, in response to recent developments.”
Patrick Harker and Austan Goolsbee are also due to speak later in the week.
However, Fed Chairman Jerome Powell may be left to offer some of the latest information at the annual Jackson Hole Economic Symposium near the end of the month (24-26 August).