US: CPI likely to show another decent increase of 0.36% in October - Nomura

Research Team at Nomura, expects the US headline CPI to show another decent increase of 0.36% m-o-m in October following a 0.29% advance in the previous month.

Key Quotes

“That forecast would push up its year-on-year change rate to 1.7% (1.66%) from 1.5% (1.46%) previously. On a non-seasonally adjusted basis we forecast the level of CPI was 241.785 in October.”

“Among non-core components, a 1.6% m-o-m gain in retail gasoline prices translates into a 6.6% jump in CPI’s motor fuel prices on a seasonally adjusted basis. Combining our expectations for other energy components, our forecast for the aggregate energy price is a 3.1% m-o-m increase. On food prices, favorable harvesting conditions and increasing inventories of agricultural products probably continued to weigh on prices at grocery stores. We expect food-at-home prices to decline again while food-away-from-home prices, the other component of food prices, likely increased steadily in the month. On net, we expect the overall food price index to be essentially flat.”

“Excluding food and energy, our forecast for core CPI is +0.165% m-o-m in October, which would keep the y-o-y change rate at 2.2% (2.18%). That would be an acceleration from a moderate increase of 0.1% (+0.112%) m-o-m in September. On the details, we expect some volatile components to show weakness as airline fares and lodging-awayfrom-home prices probably declined in October after increasing in the previous month. Moreover, rent-related inflation might have slowed down slightly given the recent developments in multi-housing markets. However, medical care service prices appeared to increase at a trend-like pace following a flat reading in September while prices for telephone service and cable television services both of which declined sharply in September probably remained essentially unchanged or rebounded in October. We expect core goods prices to increase slightly in the month after a 0.1% fall in the previous month as the lagged impact from exchange rates continued to wane. As usual, our CPI forecast is subject to incoming information such as PPI and import prices which are scheduled to be released before the October CPI report.”