PPI: Medical Services, Airfares Eyed For PCE Clues

July's producer prices report will as usual be looked at mainly for the impact on the Fed's preferred price gauge of PCE, and within that, ex-housing core services PCE. Overall PPI final demand / ex-food/energy / ex-food/energy/trade are all seen ticking up to 0.2% M/M vs 0.1% in June.

• Of particular note in the report will be medical care services prices (-0.4% M/M in CPI) and airfares (2nd consecutive 8.1% M/M drop in CPI), which feed into the PCE numbers.
• In June, for example, those categories rose more in the PPI than in the CPI report, helping core PCE exceed core CPI albeit only by a small margin at +0.165% vs +0.158%. The relevant benchmarks here from June are professional health services at +0.2%, health insurance at +0.2%, and airline passenger services at +1.1%.

Here are a couple of analyst takes on July PCE inflation following yesterday's CPI data, and coming into the PPI data today (core PCE was +0.17% M/M unrounded in June):

• Morgan Stanley: +0.10% M/M core PCE, +0.11% headline. "While core services ex housing and medical in the CPI report accelerated from 0.00% to 0.39%, the preliminary forecast for core services ex housing and medical for PCE is to tick down from 0.29%M in June to 0.25%M in July."
• JPMorgan: +0.12% M/M core.PCE