US CPI Preview: A soft reading should not be taken as an indication that inflation is quickly fading – Wells Fargo

After a week with a few economic reports, next week the calendar is busy in the US. Special attention will receive the Consumer Price Index on Tuesday. According to analysts at Wells Fargo, look for the headline to rise 0.4% in August. They warn a soft reading should not be taken as an indication that inflation is quickly fading.  

Key Quotes: 

“We look for headline and core CPI to increase 0.4% and 0.2%, respectively, in August. Our bottoms-up forecast indicates that both are close calls, with the risk for the headline tilted to the downside and the risk for the core tilted to the upside. Used car prices could finally give up some ground after three-straight months of declining wholesale prices, while travel-related inflation should soften further in the wake of Delta concerns. But food, shelter and goods prices, apart from used cars, are expected to put up further strong gains.”

“A softer monthly print should not be taken as an indication that inflation is quickly fading back to its anemic pre-COVID pace. The initial stage of reopening may be behind us, but the economy remains in transition mode. Until inventories are rebuilt and workers return to the labor market in greater numbers, inflation is set to remain elevated. The duration of “transitory” continues to lengthen.”