Scotia See Above Consensus Core CPI

Scotia see headline CPI a tenth higher than consensus at 1.2% M/M to push the year ago rate up from 8.6% to 8.9% Y/Y but are notably above consensus for core with a large jump in sequential used car prices and further support from re-opening categories.

• Core CPI is seen at 0.8% M/M, keeping the year-ago rate steady at 6.0% Y/Y (0.3pps above consensus).
• The main driver behind the call compared to other analysts is a 4.5% M/M increase in used vehicle prices using a proxy of the BLS input source.
• Reengagement effects particularly through high-contact service prices like airfare, lodging, car rentals, etc contribute to an extra three-tenths rise in inflationary pressures from a bottom-up standpoint.
• As for non-core items, they see gasoline prices rising 9% M/M and another 1% M/M rise in food prices split between groceries and at-home contributions.
• The Cleveland Fed’s inflation nowcast points to a 8.7% Y/Y rise for headline during June with sustained pressures early July despite base effects that should bias the number downwards, and this measure has recently been underestimating inflation.