TD Securities economists expect United States (US) July Core Consumer Price Index (CPI) to return to trend after June\u2019s one-off weakness. They forecast Core CPI at 0.20% m\/m and 2.4% y\/y, with Headline CPI at 0.15% m\/m and 3.4% y\/y, and see upside risks if June\u2019s soft categories bounce more strongly.<\/p>\n
July CPI expected to regain monthly momentum<\/p>\n
“We expect next week’s CPI data to report that underlying inflation rebounded after one-off items dragged the series surprisingly lower in June, with the core expected to rise 0.20% m\/m in July. The services segment should be the main driver to the upside, while core goods prices likely added to inflation for the first time in three months.”<\/p>\n
“Our forecast for July core CPI expects rent and OER to rebound slightly after moderating more than expected in June. Overall, the m\/m profile will likely move back in line with its trend before the April adjustment. We look for 0.26% and 0.27% m\/m for rents and OER, respectively.”<\/p>\n
“We project that core CPI rose 2.4% on a y\/y basis, down 20 bps vs June; likewise for headline inflation which likely slipped 10 bps to 3.4% y\/y. We see the risks to our forecasts as skewed to the upside in the event the bounce back from the one-off declines in June prove to be firmer than we anticipate.”<\/p>\n
“We expect headline CPI rose 0.15% m\/m in July, despite the energy component continuing to act as a drag (gasoline: -2.9% m\/m). Conversely, food inflation likely gained additional momentum in July on the back of another increase in grocery prices.”<\/p>\n
“We expect the core segment to continue to evolve positively through September after cresting in May at 2.9% y\/y. Likewise for headline inflation which likely saw its peak for the year at 4.2% in May, but its evolution will remain entirely dependent on the final resolution of the Middle East conflict. We expect both series to resume momentum in Q4.”<\/p>\n