MNI DATA PREVIEW: US March Core CPI Seen +0.2%; Downside Bias

     WASHINGTON (MNI) - The Consumer Price Index to be released on Wednesday is

expected by both the Bloomberg consensus and the median forecast in an MNI

survey of analysts to show an overall rise of 0.4% on a further increase in gas

prices. Markets are looking for a 0.2% gain in overall CPI.

     Analysts in both surveys are calling for a 0.2% rise for core CPI in March

after a softer 0.1% gain in February.

     Ahead of the release on Friday, we outline important themes for particular

attention.

     - Over the last 20 years, analysts have overestimated March headline CPI

ten times, including in each of the last four years, underestimated four times,

and been on target six times, with misses usually only 0.1 basis points. So

there is a risk of a small downside surprise.

     - In the last 20 years, analysts have overestimated core prices nine times,

underestimated six times, and been on target five times. Their absolute average

miss over this period is 0.11pp, and 0.09pp in just the last ten years. Given

this history, there is also a slight downside bias to analysts' forecast for a

0.2% gain in core CPI this month.

     - This month, market participants are expecting a smaller 0.2% gain than

analysts' 0.4% median forecast. Over the last year, markets and analysts have

overestimated CPI five and six times respectively, with markets missing by a

wider margin. Analysts have correctly estimated CPI five times, while markets

have been on target six times.

     - As discussed in a recent MNI Analysis piece, severe flooding in the

Midwest towards the end of March threatened to disrupt agricultural supply

chains in the US, signaling a distinct possibility for a jump in headline

inflation led by food prices. This would support the analyst forecast for a 0.4%

rise in headline inflation.

     - After sustained weakness in Q4 2018 and Q1 2019, energy prices are

expected to climb in April after a rebound in March. Data from the Automobile

Association of America indicates that the average pump price of gasoline

increased by over 20 cents in both March and April, supporting the prospect of a

month over month boost in headline inflation. It should be noted that despite

the short term rebound, the year over year price of energy has yet to recover.

--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; +1 202-371-2121; email: shikha.dave@marketnews.com

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