US: Core CPI likely to grow by 0.3% in July - Nomura

Analysts at Nomura expect a 0.3% (0.260%) m-o-m in US core CPI inflation in July and if realized, the 12-month change rate would remain at 2.3% (2.350%).

Key Quotes

“Solid readings of the persistent components of core CPI in June suggest that the underlying trend of core inflation remains unchanged. We expect continued steady inflation of rent of primary residence and owners’ equivalent rent (OER), which account for about 40% of core CPI.”

“Moreover, we think the inflation of used vehicle prices will show a steady increase in July after a sharp m-o-m jump in June. We see some upside risk from volatile components that lowered core inflation in June. In particular, we think apparel prices and lodging away-from-home prices could increase strongly in July after sharp declines in June, given their strong mean-reverting tendencies. Airline fares, which declined in June despite higher jet fuel prices, may also revert to its trend in July.”

“Among non-core components, we think food prices rose a steady pace of 0.2% m-o-m. Energy prices likely declined somewhat considering lower prices of retail gasoline and other fuel prices in July relative to June levels. Altogether, we expect a 0.2% (0.227%) increase in the headline CPI in July, which would be equivalent to 3.0% (2.993%) y-o-y growth. For CPI NSA, we forecast 252.112.”