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SocGen: Energy and Rent Uncertainty Key To CPI Ahead

US OUTLOOK/OPINION
  • SocGen see headline CPI at +0.7% M/M (per cons) and core CPI a little below at +0.4% M/M (cons 0.5), the latter up with “housing, autos and medical prices expected to be contributors”.
  • Looking ahead to coming months, headline inflation could be knocked around by “substantial volatility in the monthly readings” of energy prices.
  • Oil prices have plunged since late Nov but retail gasoline prices are sticky to the downside “and seasonal adjustments may keep household energy prices firm through the year-end”, leaving a potentially material drop into early 2022 if oil prices remain near current levels.
  • For Nov, SocGen sees gasoline prices up 7% M/M based on pump prices, but “guessing those prices for December through March is far more difficult”.
  • Beyond energy, “rents and owners’ equivalent rents (OER) are the main concern”. Rents increased 0.4% M/M in Sep and Oct and “the current pick-up in the OER is closing the gap with pre-COVID trends”, with potential to overshoot the trend ahead.
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