MNI DATA PREVIEW: US June Core CPI Expected To Hold Steady

By Kevin Kastner, Brooke Migdon, and Alexa Kelley

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

on Thursday, is expected to hold steady based on an MNI survey of analysts, with

a decline in gasoline prices a key factor. Core CPI is expected to rise 0.2% due

to higher used vehicle and housing prices. Some analysts also expect an uptick

in tariff-related categories.

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

1.7%, but keep the year/year rate for core CPI at 2.0%.

     Here are a few key points to keep in mind:

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

with six correct estimates in the last 10 years. Even the recent misses have

been very modest, all only by 0.1 percentage point, so a large surprise in

highly unlikely.

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

correct estimates in the last 10 years compared with only two overestimates and

three underestimates. Even those misses were by only 0.1 percentage point each,

a common theme for core CPI. In the case of both overall and core CPI,

overestimates have been more common than underestimates recently, so any chance

of miss would be tilted to the high side.

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

apparel prices were flat in May on offsetting components. Analysts expect that

sluggishness to continue in June with another flat reading.

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

the last three months and were up 3.3% year/year through May, outpacing a number

of other categories. This should continue in June, lifting the core reading.

     - Gasoline prices are expected to further decline this month based on data

from AAA. This expected decrease comes after a small decline in May, but solid

gains in the previous four months. The gasoline decline may be supplemented by

another drop in motor fuel prices, further depressing the energy component.

     - After rebounding from 0.1% drop in April to a 0.3% gain in May, food

prices are expected to continue to increase. Recently, the food category has

been driven higher by increased prices in the "food away from home" category,

which has bled through to food services and drinking places in the retail sales

report. Analysts expect a small increase in the current month.

     - The expected flat reading for overall CPI, if realized, would allow the

year/year rate to dip modestly to 1.7% from 1.8% in May. At the same time, the

expected 0.2% gain in core CPI should keep the year/year rate at 2.0%, still

down from 2.2% as recently as January.

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

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

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

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