US: Inflation shows signs of life – NAB

In view of Tony Kelly, Senior Economist at NAB, a major issue over 2017 has been the slowdown in US consumer price inflation after the headline inflation, as measured by the personal consumption expenditure (PCE) price index, slowed from 2.2% yoy in February 2017 to 1.4% yoy over June to August.

Key Quotes

“This partly reflects oil price movements, but even core (ex food and energy) slowed noticeably from 1.9% yoy at the start of the year to a low of 1.3% yoy in August.”

“However, in recent months there has been some strengthening in inflation. This partly reflects movements in energy prices but even on a core basis there has been some acceleration. While November’s core CPI was on the soft side, on a 3mth/3mth basis – which strips out some of the volatility – there has clearly been a rise from low rates recorded earlier in the year. Moreover, business survey price measures are relatively high and upstream price growth, as measured by the producer price index has picked up.”

“While still early days, the recent data are consistent with our view that the slowdown would prove transitory and that inflation will gradually track back towards the Fed’s 2% target.”