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MS At Low End Of CPI Consensus

  • Morgan Stanley see core CPI at 0.26% M/M in October (vs 0.32% in September, and 0.3% consensus). “A reading in line with our expectation would be well lower than the ~0.4%M average from January to May, and imply an increase of 0.25%M for October core PCE vs 0.30%M in September.”
  • The “main category driving disinflation is core goods, where we expect deflation to continue. For used cars, recent negative prints in leading indicators […] lead us to expect a drop of 1.7%M in October.”
  • They see core services decelerating to 0.43% M/M as shelter moves back below 0.5%. "We see housing CPI below 0.5%M in October, coming in at 0.45% and explaining most of the deceleration in services.”
  • “Health insurance will update in October and move from an average of about -4%M (Oct-22 to Sep-23) to prints around 0.5% from Oct-23 to Mar-23. This reset adds about 3bp to monthly core inflation prints in the coming months.”
  • They see key components to watch as energy, health insurance, housing, and auto insurance.

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