TD Securities economists Oscar Munoz, Eli Nir, Gennadiy Goldberg and Molly Brooks expect August Core CPI to rise 0.19% m\/m, with services driving gains and core goods offsetting. They project Core CPI at 2.3% y\/y and Headline CPI steady at 3.4% y\/y. Risks are seen skewed higher due to assumed tariff-sensitive goods declines, while core inflation is expected to ease through Q3 before re-accelerating in Q4.<\/p>\n
Core inflation supported by services<\/p>\n
“We expect this week’s CPI data to report that underlying inflation stayed under control in August, with the core expected to rise 0.19% m\/m. The services segment should be the main driver of inflation, while core goods prices likely acted as a drag, posting a modest m\/m drop.”<\/p>\n
“We project that core CPI rose 2.3% on a y\/y basis, down 10 bps vs July, while headline inflation likely stayed unchanged at 3.4% y\/y. We see the risks to our forecasts as skewed to the upside given that we’re assuming a number of large price declines in tariff-exposed goods categories.”<\/p>\n
“We look for goods prices to resume declines in August after registering a 0.20% increase in the last report. The core goods ex-vehicles segment (tariff-related) likely walked back its firm July gain with a 0.15% m\/m decline, with drops in household goods and apparel acting as key drivers. Strength in new vehicle prices likely contributed to inflation for a second consecutive month.”<\/p>\n
“The services segment is expected to gather more steam in August, printing a 0.26% m\/m increase, owing to firmer shelter inflation along with gains in vehicle maintenance, hospital, and recreation services. We also look for airfares to climb 3.2% m\/m, up a full percentage point from July.”<\/p>\n
“We expect the core segment to continue to evolve positively through October 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 y\/ y momentum in Q4.”<\/p>\n