US: Core CPI to increase at a more moderate pace in January - Nomura

Analysts at Nomura expect US core CPI to increase at a more moderate pace in January after a steady gain of 0.239% m-o-m in December.

Key Quotes

“Our forecast for core CPI inflation is 0.2% (0.188%) m-om, which would lower its y-o-y change to 1.7% (1.682%) in January, from 1.8% (1.776%) in December. December core CPI was partly boosted by temporary factors such as idiosyncratic jumps in rent data for certain metropolitan areas and positive payback from softness in prior months. As those temporary factors wane, we think that core inflation decelerated slightly in January. Moreover, although January core CPI has historically tended to outperform market expectations, new seasonal factors may appear to address such residual seasonality issues.”

“In addition, methodological changes to the calculation of used vehicle prices should have a small negative impact on January’s CPI inflation. For non-core components, we expect energy prices to move up modestly by 2.6% m-o-m, led by higher gasoline prices, while we think food prices probably continued their trend-line increase of 0.2% m-o-m. All in, our forecast for headline CPI is an increase of 0.4% (0.369%) m-o-m or 2.0% (1.960%) y-o-y. We expect CPI NSA to be 247.599.”