US OUTLOOK/OPINION
Reminder that the January PPI report (0830ET) will mainly be eyed for core PCE implications (as Chair Powell suggested yesterday after the upside CPI surprise).
- The main PPI aggregates are expected to accelerate: overall M//M to 0.3% (0.2% prior), with ex-food/energy/trade seen up to 0.3% from 0.0% prior. As with CPI yesterday, we get revisions: Relative Importance and Seasonal Adjustment Factors are due (we haven't seen any expectations on the implications but obviously they could offer a different take on core PPI momentum last year which showed a strong start and a soft finish to 2024).
- As for PCE implications, below are the post-CPI expectations for core PCE - rough consensus is somewhere in the mid-0.30% area, though post-CPI estimates vary widely. A figure in that area would mean a lower figure than January 2024's 0.498% M/M, and a softer Y/Y reading of 2.6% or 2.7% vs 2.8% in December. And of course it would be much softer than the 0.45% M/M core CPI rise.
- JPMorgan: 0.27%
- Citi: 0.33% vs 0.31% pre-CPI
- Goldman: 0.35% vs 0.32% pre-CPI
- Nomura: 0.351% vs 0.28% pre-CPI
- TD Securities: 0.38%
- HSBC: "close call" between 0.3% and 0.4%
- Mizuho: 0.3-0.4% range (they are expecting 0.4% M/M core PPI and 0.5% headline)
- Prominent PCE-related categories that use the PPI reading include airfares which decelerated in the CPI report (1.2% M/M in Jan from 3.0% prior), auto insurance which accelerated in CPI (2.0% from 0.5%), and (some) healthcare services which decelerated in CPI to 0.0% from 0.2%. There's no equivalent to PPI / PCE portfolio services in CPI.
- In terms of expectations for the PCE-relevant inputs from the PPI report, Nomura look for higher portfolio management and health insurance (noting positive residual seasonality in January), with a decline in PPI physician services prices offset by an increase in hospital services.
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