Cooler than expected US CPI data


The 0.1% July CPI headline and core price gains both slightly undershot estimates, with a 0.1% energy price downtick instead of an expected small uptick, a 0.2% food price rise, and additional core price declines of 0.5% for new vehicles that left a sixth consecutive drop, and of 0.1% for tobacco. The headline figures rounded from lean gains of 0.106% for CPI and 0.114% for the core. We expect a 0.2% August headline CPI rise with a 0.1% core increase with a lift from gasoline. The headline y/y increase should rise to 1.8% from 1.7% in July and 1.6% in June, but a higher 1.9% in May, while the “core” y/y rise slides to 1.6% from 1.7% over the three months ending in July. We expect 0.1% headline and core PCE chain price gains that match today’s CPI data. We expect a 0.4% July nominal consumption rise with a 0.3% “real” increase, with an expected lift from an assumed 0.4% July retail sales rise with a 0.3% ex-auto gain. Our 3.3% Q3 GDP growth forecast after an assumed trimming in Q2 growth to 2.3% from 2.6% includes “real” consumption growth of 2.3% (was 2.2%) in Q3 after 2.8% growth in Q2.

The dollar slid lower following the July CPI figures, which were light of expectations, as were Thursday’s PPI outcome. EURUSD recovered some losses seen since US NFP by surging to 1.1818 from 1.1765, however it seems to getting lower after the data. Meanwhile USDJPY slumped to 108.74, a nearly four-month low, from near 109.20. Equity futures turned modest losses into modest gains, while yields pulled back. The data are another strike against another rate hike this year.

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Andria Pichidi

Market Analyst


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