MNI 5 THINGS: US August Core CPI To Rise, Keeping Y/Y At 2.4%

Repeats Story Initially Transmitted at 19:30 GMT Sep 12/15:30 EST Sep 12

     WASHINGTON (MNI) - The Consumer Price Index will be released Thursday, and

analysts are expecting overall CPI to rise 0.3% as the core component increases

0.2% in August.

     Ahead of the release, we outline five themes for particular attention.

--HEADLINE CPI TO SHOW NO SURPRISE 

     Analysts are expecting a 0.3% increase in headline CPI in August. Their

history shows a tendency to be very accurate when estimating the headline value

for August. In the last ten years, analysts have been on target five times,

underestimated three times, and overestimated only twice. When they miss, their

underestimates averaged 0.13pp and their overestimates averaged 0.15pp. This

indicates that analysts are likely to be on target again this month, and that if

they do happen to miss, it should be by a relatively small margin. If the

headline value does not come in as expected, a slight upside surprise could be

possible.

--HISTORY SUGGESTS NO CORE CPI RISK

     Similar to the history for headline CPI, analysts are most often on target

for core CPI. In the last 20 years, analysts have been on target ten out of the

last 20 Augusts and shown a tendency to overestimate when they do miss, having

done so eight times with an average of 0.11pp. More recently, analysts have been

on target in five out of the last ten August reports. The other five years have

also leaned toward overestimates (4) rather than underestimates (1). As a

result, a weaker-than-expected number is the most likely miss.

--MARKETS EXPECT SOFTER GAIN THAN ANALYSTS

     This month, analysts are forecasting a 0.3% increase in CPI and markets are

expecting a slightly softer 0.2% gain. In the last year, markets have missed CPI

eight times and been on target four times, compared to analysts, who have missed

six times and been on target 6 times. Markets' misses have averaged 0.2pp for

both overestimates and underestimates in the past year. Analysts, on the other

hand, have shown some variation in their misses, with their overestimates

averaging 0.1pp and their underestimates averaging 0.15pp. Because of the

accuracy with which analysts forecast CPI, they have a significantly lower

absolute average miss of 0.06pp compared to markets' absolute average miss of

0.13pp. Given that analyst expectations tend to be either accurate or very close

to the actual CPI value, any surprise in this month's report should be

relatively small.

--PPI CORE PCE DATA WERE POSITIVE

     Earlier Wednesday, the Bureau of Labor Statistics released their monthly

report on the August Producer Price Index. The report includes a measure of

prices received by producers for goods meant for personal consumption, which

could foreshadow the August CPI numbers. Both the PPI personal consumption

headline and ex. food and energy figures were flat on the month, but personal

consumption ex. food, energy and trade was up 0.3%. This indicates some upside

risk for core CPI in August, and is consistent with analysts' estimates of a

0.2% increase. However, it should be noted that because the PPI personal

consumption measure does not include import prices, it may not always be the

most accurate indicator of CPI.

--ENERGY A POSITIVE FOR CPI

     Analysts are expecting energy prices to boost headline CPI due to rising

retail gas prices, possibly on a rebound from an unexpected 0.6% decline in

July. However, unadjusted data collected from the American Automobile

Association (AAA) suggests that pump prices were down very slightly from the

middle of July to the middle of August, which could suggest some downside risk.

Some price improvement later in the month is likely a factor in analysts'

estimates. Additionally, after two consecutive declines in June and July,

electricity prices could also put upward pressure on headline CPI.

--MNI Washington Bureau; tel: +1 202-371-2121; email: kevin.kastner@marketnews.com

--MNI Washington Bureau; +1 (973) 494-2611; email: harrison.clarke@marketnews.com

--MNI Washington Bureau; +1 202-372-2121; email: shikha.dave@marketnews.com