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MNI DATA PREVIEW: CPI to Retreat, But Core Infl Could Tick Up

By Holly Stokes and Sara Haire
- October CPI expected to see a 0.1% rise, while core CPI expected to rise 0.2%.
- After September's surge, analysts expect October to see a correction.
     - Analysts expect tame readings for both gasoline and food prices in
- If core CPI sees a considerable rise, the year/year could advance for the
first time since January. 
- Core inflation is expected to start increasing in the coming months, if not in
     WASHINGTON (MNI)- Analysts expect October CPI to post a small 0.1% gain in
Wednesday's report, after September and August saw large 0.5% and 0.4% gains,
     Core CPI is expected to post a more healthy 0.2% gain after September's
0.1% rise.
     There is general consensus that October headline CPI is due for some
payback after the past two months benefited from large energy sector
contributions. With gas prices down in October, as Harvey's impact fades, Morgan
Stanley estimates a 1.7% decline in energy - which could translate to a flat
CPI. If CPI comes in at the median forecast of a 0.1% gain, this will translate
to a year/year gain of 2.0%, down two tenths from September.
     Analysts such as BMO also do not expect the food sector to contribute
significantly to the headline number, as Amazon's acquisition of Whole Foods
ignites competition, leading to expectations of a near-flat food price sector.
     While headline CPI is poised to soften, core CPI could inch up and
normalize after a somewhat volatile past two months. If core CPI posts the
forecasted 0.2% gain, this would leave year/year at a 1.7% increase, for the
sixth month in a row.
     Capital Economics expects core consumer prices to see a 0.3% gain, the
survey high. If correct, this would translate to a 1.9% rise year/year - the
first time that the figure has risen since January, and help signal that factors
depressing inflation in the beginning of the year were in fact transitory.
     Analysts expect core CPI to benefit from a rebound in both vehicle and
hotel prices. While Goldman Sachs agrees that the risks are skewed to the
upside, they do caution that promotions from wireless carriers could weigh on
the communications category.
     Looking ahead, analysts believe that core inflation should start picking up
soon. BMO states that if not in October, the annual rate should start rising in
the months to come. And, Deutsche Bank states that while near-term inflation
looks tame, they see an inflection point on inflation on the horizon.
--MNI Washington Bureau; +1 212-800-8517; email:

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