MNI 5 THINGS: US September Core CPI To Rise 0.2%; Mixed Risks

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

analysts are expecting both overall and core CPI to rise 0.2% in September.

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

--NO HEADLINE SURPRISE

     This month, analysts are forecasting a 0.2% increase in the headline CPI

value. Their history for estimating this value in September shows a tendency to

be very accurate. In the last 20 years, analysts have been on target nine times,

underestimates six times, and overestimated five times. When they underestimate,

they do so by an average of 0.13pp and when they overestimate it is by an

average of 0.12pp. This indicates that a miss in either direction for this

month's report should be relatively equal in size. In the last ten years,

analysts' expectations have been on target five times. They have overestimated

three times and underestimated twice during this time. Further supporting their

tendency to be accurate is the fact that in the last five years, analysts have

been on target four times and overestimated once by 0.1pp. If the headline value

does not come in as expected, there is no clear risk for the direction of a

miss, but it is likely that a miss will be very small.

--DOWNSIDE CORE CPI SURVEY RISK

     Based on analysts' history of overestimating core CPI, there is a downside

risk for this month. In the last 20 years, analysts have overestimated ten

times, underestimated four times, and been on target six times. On average, they

overestimate by 0.11pp and underestimate by 0.10pp, suggesting that a miss in

either direction this month would be about the same in size and relatively small

overall. However, in just the past ten years, analysts have shown a clear

tendency to overestimate, having done so eight times. If analysts' 0.2% forecast

for the seasonally adjusted figure is accurate, then the year/year rate for core

CPI could tick up to 2.3% after rounding.

--MARKETS, ANALYSTS BOTH SEE 0.2% GAIN

     Both markets and analysts are anticipating a 0.2% rise in overall CPI in

September. Since September 2017, they have been in agreement only three times.

In the last year, markets have missed the mark seven times, with five

overestimates averaging 0.2pp and two underestimates averaging 0.2pp. Their

absolute average miss for the last year is lower, at 0.12pp, a reflection of

having been on target five times. Analysts have missed six times, with five

overestimates averaging 0.1pp and one underestimate averaging 0.2pp. Like

markets, analysts' absolute average miss is lower, at 0.06pp, since they have

been on target six times in the past year. Based on their history, it is likely

that if both markets and analysts miss this month, there will be a downside

surprise.

--PPI IN LINE WITH CPI FORECASTS

     Earlier Wednesday, the Bureau of Labor Statistics released their monthly

Producer Price Index report, which includes a measure of prices received by

producers on items meant for personal consumption. While the headline figures

were in line with the CPI estimates, the PCE-based measures for overall and core

were a bit softer at +0.1% and +0.2%, respectively. This suggests a degree of

downside risk, but are still generally in line with analyst forecasts.

--CHINA TARIFFS UPSIDE RISK 

     After an additional $200 billion worth of tariffs on goods imported from

China were announced in September, analysts are expecting some increased upward

pressure on core CPI in September, with a further impact in October as the

tariffs did not get implemented until the last week of September. Although

tariffs have had little apparent impact on consumer prices so far this year, it

is possible that could change, as the extent of the newest round of tariffs is

much larger the previous one - $200 billion versus $50 billion worth of goods.

In total, this means that roughly one half of all Chinese exports to the US will

face tariffs. This could cause both the month/month and year/year rates of core

CPI growth to move a bit higher than expected.

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

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