NatWest In Line W Survey On Core, Sees Strong Goods Prices

NatWest (+0.5% headline, +0.467% core): NWM's unrounded core forecast is similar to the BBG avg (+0.44% M/M). They write: "Similar to April and May, [June]core CPI was likely boosted by reopening related demand and supply side bottlenecks. We expect half of the forecast strength in the core CPI to have stemmed from elevated goods prices...Used car prices, which accounted for roughly 40% of the core CPI gains in April and May, likely drove the core measure again, albeit to a lesser extent. We expect used car prices rose 2.7% (m/m) in June, accounting for 20% of the rise in the core."

• "On the core services side, COVID-impacted services, including airfares, car leasing, motor vehicle insurance and lodging away from home could have all stayed firm in June...[but] we expect gains to be more modest than in April and May... For instance, we forecast airfares to have advanced by 3.0% in June, after rising by 10.2% in April and 7.0% in May...Away from these services, rental costs likely mostly maintained their May clip in June."
• "A slight upside surprise to our unrounded 0.5% core CPI forecast, would tip the y/y rate to 4.1%...Post June we expect base effects to start reversing, with both the headline and core measures set to moderate somewhat by year end."

Source: NatWest Markets