US: September PPI poses downside risk to CPI report - Nomura

Analysts at Nomura commented on the PPI numbers that only matched consensus, but argued that airline fares may pose upside risk to core PCE inflation.

Key Quotes:

"PPI details suggest downside risk to September CPI forecast The headline PPI rose 0.2% m-o-m in September, matching the consensus forecast. Excluding volatile components such as energy (-0.8%), food (-0.6%) and trade service prices (+0.1%), the "core" PPI showed a decent increase of 0.4% m-o-m compared with the market expectation of 0.2%.

That said, some of the strength in the core PPI was attributable to higher prices for airline passenger services, which rose strongly by 5.5% m-o-m. As this component has been volatile and is often affected by changes in jet fuel prices and the seasonal patterns of holiday travel, the 0.4% gain in the core PPI may not be sustainable."