US inflation outlook: Stable but slightly trending down

  • US core inflation data is slightly but consistently trending down in the last 10 releases.
  • A negative surprise on the US CPI data looks more likely than a positive one.

The US Consumer Price Index (CPI) data for the month of May is being released on Wednesday at 12.30 GMT and the market will scrutinize it, looking for hints on the Fed's thought process going into their meeting later this June. While the data is forecasted to be quite stable, which could diminish its impact on the markets, the US economy has been releasing underperforming data recently, as our FXStreet Surprise Index reflects, which has undermined the US Dollar bullish trend. After the disappointing labor market data seen in last week's Non-Farm Payrolls, another miss in the inflation numbers would look bad for the greenback prospects, increasing Fed rate cut odds.

Looking at the US inflation big picture, our table shows a majority of inflation-related indicators trending down through their last 10 releases, with basically only headline month-over-month data trending up. All core indicators, both in CPI and Producer Prices Index (PPI) but also on the Fed's preferred Personal Consumption Expenditures (PCE) data, are trending down. Wages are still comfortably rising above 3%, the most positive inflation-related indicator in all, but that rise has struggled to translate into higher consumer prices, particularly in the PCE data, which has consistently been below the Fed's 2% target.

Consumer-related inflation Impact Last Trend Last 3 Last 5 Last 10
CPI exFood/Energy YoY 3 2.10% Down 2.07% 2.12% 2.17%
CPI exFood/Energy MoM 2 0.10% Down 0.10% 0.14% 0.15%
CPI YoY 2 2.00% Neutral 1.80% 1.78% 2.15%
CPI MoM 2 0.30% Up 0.30% 0.16% 0.16%
Core PCE Price Index YoY 2 1.60% Down 1.63% 1.72% 1.83%
Core PCE Price Index MoM 2 0.20% Neutral 0.10% 0.12% 0.12%
PCE Price Index YoY 1 1.50% Down 1.43% 1.48% 1.77%
PCE Price Index MoM 1 0.50% Up 0.20% 0.12% 0.12%
PPI exFood/Energy YoY 2 2.30% Down 2.37% 2.44% 2.50%
PPI exFood/Energy MoM 1 0.20% Neutral 0.20% 0.20% 0.18%
PPI YoY 1 1.80% Down 2.07% 2.02% 2.34%
PPI MoM 1 0.10% Up 0.30% 0.18% 0.15%
GDP Price Index 2 0.50% Down 1.30% 1.88% 1.88%
ISM Prices Paid 2 53.20 Down 52.50 51.30 58.27
Redbook Index YoY 1 5.00% Neutral 5.50% 5.42% 5.43%
Redbook Index MoM 1 -2.60% Down 0.03% 0.52% 0.71%
Labor-related inflation Impact Last Trend Last 3 Last 5 Last 10
Average Hourly Earnings YoY 3 3.10% Neutral 3.17% 3.22% 3.12%
Average Hourly Earnings MoM 2 0.20% Down 0.17% 0.20% 0.25%
Personal Income MoM 2 0.50% Neutral 0.27% 0.34% 0.32%
Employment Cost Index 1 0.70% Up 0.73% 0.72% 0.67%
Housing-related inflation Impact Last Trend Last 3 Last 5 Last 10
Housing Price Index MoM 1 0.10% Neutral 0.33% 0.34% 0.29%
Trade-related inflation Impact Last Trend Last 3 Last 5 Last 10
Import Price Index YoY 1 -0.20% Down -0.50% -0.56% 1.34%
Import Price Index MoM 1 0.20% Up 0.47% -0.02% -0.13%
Export Price Index YoY 1 0.30% Down 0.40% 0.42% 1.76%
Export Price Index MoM 1 0.20% Up 0.50% 0.06% -0.08%
Manufacturing-related inflation Impact Last Trend Last 3 Last 5 Last 10
Kansas Fed Manufacturing Activity 1 2 Neutral 10.3 5.8 6

All in all, a slightly negative surprise would look more consistent with the current inflation and macroeconomic trends than a positive one.

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