US: CPI accelerating as per consensus – Nomura

Analysts at Nomura note that US headline CPI rose 0.2% (0.209%) m-o-m in May, in line with consensus but somewhat weaker than their expectations (Consensus: 0.2%, Nomura: 0.259%).

Key Quotes

“The primary reason for our upside forecast miss was an unexpected 0.2% m-o-m decline in food-at-home prices. However, excluding food and energy, core CPI in May was essentially in line with our expectations, rising 0.171% m-o-m (Consensus: 0.2%, Nomura: 0.158%).”

“Looking at the details, as expected, prices for used vehicles continued to decline. In addition, as discussed in our CPI preview, rent inflation in May decelerated from a relatively strong increase in April. Although we have yet to see the May PPI report, today’s CPI data, with reasonable assumptions for missing PPI data, indicate a range of 0.17-0.20% m-o-m for core PCE inflation in May, which would push up its 12-month change to 1.9%, from 1.8% in April. The combination of a trend-like pace of rent inflation and continued weakness in used vehicle prices indicates that core inflation will likely accelerate only modestly. Thus, we maintain our view that y-o-y core PCE inflation will pick up by only a couple of tenths over the next year.”