MNI US CPI Preview: More “Modest” Progress Within Wider Tails

EXECUTIVE SUMMARY

• Consensus sees core CPI at 0.2% M/M in June after the softer than expected 0.16% M/M in May (vs cons 0.3), with a mild skew toward a “high” 0.2%, per MNI’s compilation of sell-side previews.
• But there is an unusually wide range of estimates for core this month. Uncertainty over some categories (eg auto insurance) means that a surprise reading in either direction should be interpreted with caution.
• That may prove especially true for the “supercore’ reading, which is expected to bounce from May’s slightly negative M/M print, to 0.27% (MNI sell-side average), but with a wide range of estimates.
• While sequential energy deflation is set to drag down overall price pressures to a lesser extent than in May, headline inflation at 0.08% M/M (MNI sell-side average) is nonetheless seen remaining below core.
• Core services inflation is seen picking up to around 0.3%, from 0.2% in May. Housing will again be a key focus – analysts’ expectations imply potential for the softest monthly readings since 2021 – but its disinflationary impact is expected to be outweighed by bounces in airfares and auto insurance prices.
• Meanwhile, the expected resumption of the downtrend in used car prices should see core goods prices providing a larger deflationary impulse, at around -0.1 to -0.2% M/M (vs -0.04% in May).
• A soft or even in-line June CPI report would give the FOMC more cover to hint at July’s meeting that a September cut is on the table, if the data remain cooperative after what Chair Powell called “some modest further progress” in recent readings.
• With market positioning already implying increasing comfort with a 2-cut scenario by end-year, though, the greatest risk going into Thursday lies with a hawkish release.

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USCPIPrevJul2024.pdf