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Free AccessREPEAT: MNI 5 THINGS: US October Core CPI To Rise 0.2%;No Risk
Repeats Story Initially Transmitted at 18:30 GMT Nov 13/13:30 EST Nov 13
WASHINGTON (MNI) - The Consumer Price Index will be released Wednesday, and
analysts are expecting overall CPI to rise 0.3% and core CPI to rise 0.2% in
October.
Ahead of the release, we outline five themes for particular attention.
--HEADLINE CPI USUALLY WELL-FORECASTED
This month, analysts are expecting a 0.3% increase in the headline CPI
value. Based on their forecast history for October, they tend to be very
accurate. In the last 20 years, analysts have been on target 11 times,
overestimated five times, and underestimated four times. When they have
overestimated, it is by an average of 0.14pp and when they have underestimated,
it is by an average of 0.15pp, suggesting that a miss to either the high or low
side this month would be by relatively the same amount and likely below 0.2pp.
Within the last ten years, analysts have shown more of a tendency to
overestimate, having done so four times by an average of 0.13pp, than
underestimate, having done so twice by an average of 0.10pp. They have been on
target four times in the last ten years, including each of the last three years.
This suggests the October headline reading could be right on target.
--CORE CPI UNLIKELY TO SURPRISE
Analysts also tend to be accurate in their forecast for core CPI. In the
last 20 years, they have been on target ten times, overestimated four times, and
underestimated 6 times, suggesting a very slight upside risk if anything. Their
overestimates average 0.13pp and their underestimates average 0.10pp. Over the
last ten years, analysts have been on target four times, underestimated three
times by an average of 0.13pp and underestimated three times by an average of
0.10pp. This indicates that they are likely to be on target for this month's
core prices and there is no risk to their estimate for a 0.2% increase.
--MARKET, ANALYSTS DIVERGE
Markets are expecting CPI to rise by 0.2% in October while analysts are
expecting a stronger 0.3% gain. Since October 2017, markets have missed eight
times, overestimating six times by an average of 0.18pp, and underestimating
twice by an average of 0.20pp. Comparatively, analysts have missed six times
total, with five overestimates averaging 0.10pp and one underestimate averaging
0.20pp. Since markets have been on target four times while analysts have been on
target six times, their absolute average miss in the last year, at 0.13pp, is
much higher than analysts' 0.06pp absolute average miss. Still, both markets and
analysts have been accurate much of time. While only one can be right this
month, it stands to reason that one that misses won't be very far off.
--PPI UPSIDE RISK
On Friday, the Bureau of Labor Statistics released the monthly Producer
Price Index report, which contains a measure of prices received by producers for
goods and services for personal consumption. The measure posted a
month-over-month gain of 0.8% after a flat reading and a soft gain in the prior
two months, respectively. Although the correlation between the CPI and Personal
Consumption PPI is not particularly strong, they do tend to rise together when a
large, sudden increase like the one observed in October occurs. The core
Personal Consumption PPI was up 0.6% month-over-month, further pointing towards
possible upside risk for October CPI.
--RETAIL GAS PRICE REBOUND
In September, the CPI for energy posted a modest decline of 0.5%
month-over-month. Seasonally unadjusted data from the Automobile Association of
America suggest a rebound in October is possible. The data show that early in
October, retail gas prices edged slightly higher by 7 cents from a month earlier
after month/month declines in the previous three months. The prospect of a
rebound emerging in the most recent data, combined with the fact that Hurricane
Michael made landfall in early October, gives weight to the prospect of higher
than average headline inflation for October.
--MNI Washington Bureau; +1 (973) 494-2611; email: harrison.clarke@marketnews.com
--MNI Washington Bureau; +1 202-371-2121; email: shikha.dave@marketnews.com
--MNI Washington Bureau; tel: +1 202-371-2121; email: kevin.kastner@marketnews.com
To read the full story
Sign up now for free trial access to this content.
Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.