US CPI preview: inflation to rise solidly by 0.4% - Nomura

Analysts at Nomura explained that they expect headline August CPI inflation to rise solidly by 0.4% (0.357%) m-o-m (Consensus: 0.3%), which translates into 2.8% (2.826%) y-o-y (Consensus: 2.8%).

Key Quotes:

"Among non-core components a steady rise in gasoline prices in August, when they typically decline, will likely result in a strong increase of 2.9% m-o-m in CPI’s gasoline price index after seasonal adjustment. Stripping out energy and food prices, we expect core CPI inflation to increase solidly by 0.3% (0.256%) m-o-m in August (Consensus: 0.2%), following a 0.243% in July.

Our forecast would keep the 12-month change at 2.4% (2.367%) y-o-y in August (Consensus: 2.4%).

Although core service inflation might have decelerated slightly, core goods prices likely continued to increase in the month, boosted by higher vehicle prices and a reversal of July’s sharp declines in medical care commodities and apparel prices.

Given that core goods prices are volatile and could face some downward pressure from the stronger US dollar in the months ahead, we do not think that relatively strong increases in core goods prices will be sustained. Thus, we maintain our medium-term inflation outlook that core inflation will accelerate only gradually. Our CPI NSA forecast for August is 252.457."