US CPI / retail sales data reviewed - Nomura

Analysts at Nomura offered a review of the key data in CPI and Retail Sales from the US session.

Key Quotes:

"CPI: CPI increased 0.108% m-o-m in October, in line with expectations (Consensus: 0.1%, Nomura: 0.112%). While variation of food and energy prices was moderate, excluding food and energy, core CPI showed a decent increase of 0.225% m-o-m, slightly higher than our forecast of 0.210% (Consensus: +0.2%), following a 0.127% increase in the previous month. As a result, y-o-y core CPI inflation inched up to 1.8% (1.774%) from 1.7% (1.693%) in the previous month. The acceleration in core CPI inflation was broad-based. In particular, a pick-up in rent inflation boosted the aggregate core consumer price index. Moreover, used vehicle prices increased for the first time since December 2016, partly led by new demand caused by hurricanes. We think that some of the acceleration in rent and used vehicle prices in October was attributable to temporary factors. In the medium term, we expect core CPI inflation to pick up but only gradually on a y-o-y basis. Incorporating CPI and PPI data, our forecast for core PCE inflation is now a 0.16% m-o-m increase, which would push up its y-o-y change rate to 1.4% (1.374%) y-o-y in October from 1.3% (1.328%) previously. We maintain our view that core PCE inflation will accelerate gradually in the medium term. 

Retail sales: Core (“control”) retail sales rose 0.3% m-o-m in October, mostly in line with expectations (Nomura: 0.4%, Consensus: 0.3%), following an upwardly revised 0.5% increase (previously reported as 0.4%) in September. Aggregate retail sales were up 0.2%, in line with our expectations but above market consensus (Nomura: 0.2%, Consensus: 0.0%), lowered by weaker sales at gasoline stations and building material stores, which tend to be volatile. The healthy increases in core retail sales suggest solid momentum for PCE going into Q4 following steady growth in Q3."