US CPI preview - Nomura

Analysts at Nomura explained that they expect headline CPI to show another decent increase of 0.2% (0.197%) m-o-m in November following a 0.36% advance in the previous month.

Key Quotes:

"That forecast would push up its y-o-y change rate to 1.7% (1.717%) from 1.6% (1.64%) previously. On a nonseasonally adjusted basis, we forecast the level of CPI was 241.410 in November. Core CPI Forecast We expect core CPI inflation to accelerate only slightly to 0.154% m-o-m in November, following a 0.149% advance in the previous month.

Among core goods prices, we think that used vehicle prices remained weak but prices for medical care commodity prices and other core goods probably increased modestly over the month. As the lagged impact from the past appreciation of the US dollar continues to wane, we believe that the aggregate core goods will show another positive reading of 0.06% m-o-m after +0.07% m-o-m in October. On core service prices, medical care service prices which have been weak in September and October appeared to rebound in November.

As for other volatile components like prices for lodging away from home and airline fares, incoming information suggests essentially flat readings. On the other hand, we expect a small deceleration in inflation of rent-related items such as regular rent and home-owners’ equivalent rent. Rental home vacancy rate for the metropolitan areas in principal cities appeared to stop falling and increased in the third quarter this year and the National Multifamily Housing Council’s survey indicates a loosing of apartment markets in recent quarters. The recent weakness in the rental housing markets could translate into lower rent prices. Overall, our forecast for the aggregate core service prices is +0.185% m-o-m.

We expect the y-oy change rate of core CPI price index to remain unchanged at 2.1% on a rounded basis Food and energy price forecasts Although retail gasoline prices declined by 3.1% m-o-m in November on a nonseasonally adjusted basis, the decline was smaller than the usual seasonal pattern suggests. So, after seasonal adjustment, we expect gasoline prices to increase by 1.9% m-o-m in the CPI report. Overall, our expectations for the aggregate energy prices is +0.8% m-o-m in the month. On food prices, despite continued weakness in farmers’ received income, PPI’s finished consumer food prices unexpectedly rose by 0.5% m-o-m, suggesting CPI’s price index for food-at-home might not have declined as much as in the previous months.

We are expecting a flat reading for this metric after dropping for six consecutive months. Food-away-from-home prices, the other component of food prices, probably continued a trend-like inflation of about 0.2% m-o-m. Our forecast for the aggregate food prices is an increase of 0.11% m-o-m. Taking all this into account, we expect headline CPI to increase by 0.197% m-o-m (1.7% y-o-y)."