MNI DATA PREVIEW: US July Core CPI Expected To Rise 0.2%

By Kevin Kastner, Brooke Migdon, and Alexandra Kelley

     WASHINGTON (MNI) - The July Consumer Price Index, scheduled to be released

on Tuesday, is expected to rise by 0.3% based on an MNI survey of analysts, with

a sharp rebound in gasoline prices a key factor. Core CPI is expected to rise by

0.2% due to tariff-related boosts in several categories. 

     The expected readings should lift the year/year rate for overall CPI to

1.7%, but hold the core at 2.1% year/year.

     The following are some key things to keep in mind ahead of the release:

     - Analysts have been fairly accurate at predicting overall CPI in July,

with five correct estimates in the last 10 years. There were four overestimates

in the other five years, so a smaller-than-expected increase is a possible

outcome. 

     - The accuracy of forecasters is again very clear for July core CPI, with

four correct estimates in the last 10 years. However, like overall CPI, there is

a tendency to overestimate core, with six incidences over the last decade. Those

misses were all by only 0.1 percentage point. 

     - The forecasted 0.3% rise for overall CPI, if realized, would allow the

year/year rate to rise to 1.7% from 1.6% in May. At the same time, the expected

0.2% gain in core CPI should keep the year/year rate at 2.1%, still down from

2.2% as recently as January.

     - Gasoline prices are expected to rebound this month based on data from AAA

and the already released PPI report. Seasonal adjustment factors expect a small

decline in unadjusted gasoline prices, so a rise instead, as the AAA data point

to, would add to the seasonally adjusted increase.

     - As an MNI Analysis published on August 8 pointed out, there has been a

clear trend toward demand for food away from home. That category has seen solid

price increases in each of the three months and stand up 3.1% year/year through

June. In contrast, food at home prices have declined in two of the last three

months and are up only 0.9% year/year.

     - Analysts see an upside risk from the increased tariffs implemented on

imports from China, specifically furniture and household products. Analysts'

estimates for the impact are for less than 0.1 percentage point, but it could

still be enough to cause a surprise number.

     - After three consecutive months of declines on some methodology changes,

apparel prices were flat in May and then finally up sharply in June. Analysts

expect some pullback in July, but not likely a return to a downward trend.

     - The relatively large owners' equivalent rent category grew steadily over

the last three months and were up 3.4% year/year through June, still outpacing a

number of other categories. This should continue in July, lifting the core

reading.

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

--MNI Washington Bureau; +1 202 371 2121; email: alexandra.kelley@marketnews.com

--MNI Washington Bureau; +1 202 371 2121; email: brooke.migdon@marketnews.com

[TOPICS: MAUPR$,M$U$$$]