REPEAT: MNI 5 THINGS: US July Core CPI Seen +0.2%, Y/Y At 2.3%

Repeats Story Initially Transmitted at 18:00 GMT Aug 9/14:00 EST Aug 9

     WASHINGTON (MNI) - The Consumer Price Index will be released Friday, and

analysts are expecting both overall and core CPI to rise 0.2% in July.

     Ahead of the release, we outline five themes for particular attention.

--No Surprise Expected From Headline CPI

     Analysts' headline CPI forecasts for July tend to be accurate. In the last

ten years, analysts overestimated CPI four times, underestimated it twice, and

have been on target four times. This indicates there may be a slight downside

surprise if CPI is different than analysts' 0.2% forecast. 

     When analysts do miss, it tends to be by a small margin, with their

overestimates averaging 0.1pp and their underestimates averaging 0.25pp due to

an outlier in the July 2008. As a result, if the headline CPI comes in different

than expected, it is likely that the miss will be relatively small.

--History Suggests Downside Risk For Core CPI

     Analysts' history indicates a clear downside risk for July's core CPI. Over

the past ten years, analysts have overestimated core CPI six times (including

each of the last four years), underestimated it twice, and been on target twice.

Their average miss for both overestimates and underestimates is 0.1pp,

suggesting that if they miss in either direction this month, the magnitude of

their miss should be relatively equal. 

     In the last five years, analysts have shown a clear tendency to

overestimate core CPI. If analysts' 0.2% month/month forecast is accurate, the

year/year rate for core CPI would remain at 2.3%.

--Markets and Analysts Both Expect +0.2%

     Both markets and analysts are expecting CPI to rise 0.2% in July, as they

have the past two months. This is a relatively rare occurrence, with markets and

analysts being in agreement only three times since July 2017. In the last year,

markets have missed the mark for CPI nine times, while analysts have missed only

seven times. 

     Markets tend to not only miss more often than analysts, but also miss by a

larger magnitude than analysts. Markets have an absolute average miss of 0.13pp

while analysts' average miss is 0.06pp. 

     Given that both analysts and markets are forecasting the same percent

change for the July data, there is no clear upside or downside risk. But

considering that analysts' estimates have generally been close to the actual CPI

value, it is likely that if they do miss, it will be by a small margin.

--PPI Personal Consumption Points to Downside Risk 

     The Producer Price Index personal consumption grouping, which is used by

some analysts as a preview for CPI, came in at -0.1% on the month in July. When

taken with analysts' history of overestimating July CPI, this number further

suggests downside risk to July CPI. 

     Less food and energy, the measure was still -0.1%, but less food, energy

and trade services, it was up 0.2%. However, it should be noted that the PPI

personal consumption grouping does not always provide the best indication of CPI

because it does not include import prices, which could swing CPI in a different

direction.

--Energy Prices Possible Drag on Headline CPI 

     Although the headline CPI is expected to have increased through July,

energy is expected to either drag or have little upward pressure on CPI. This is

primarily due to lower retail gas prices through July compared to June. This has

caused some unrounded analyst estimates to fall slightly below 0.2%, but rounded

estimates largely remain at 0.2%. However, electricity prices saw a large

decline in June, which could rebound and provide upward pressure on the headline

number.

--MNI Washington Bureau; +1 202-372-2121; email: shikha.dave@marketnews.com

--MNI Washington Bureau; +1 (973) 494-2611; email: harrison.clarke@marketnews.com