US DATA
The details of August's Producer Price Index report point to a softer contribution from key categories to the Fed's preferred PCE price gauge compared with previous months. This data all but confirm that core PCE will come in lower than August's core CPI reading of +0.28% M/M, although prior analyst estimates for core PCE might see only modest downward revisions.
- Airfares (-0.8% M/M vs +0.1% prior), auto insurance (flat vs +0.3%), portfolio management (flat vs +2.0%), and health care services (+0.1% vs 0.2%) all decelerated vs July.
- Airfares PPI contrasted most sharply with its CPI reading (+3.9%), with auto insurance (+0.6%) also relatively cooler. To give an example of possible impact, airfares added 0.04pp to August core CPI (so +0.24% M/M ex-airfares).
- That said, the pickup in health and medical insurance PPI in contrast accelerated to +0.5% vs +0.1% prior, posting the highest reading since January.
- All in all these point to a roughly flat contribution from these PPI categories to August core PCE, vs +0.07pp in July, and the joint-softest monthly contribution of the year and one of the lowest of the cycle.
- Initial unrounded core PCE estimates after yesterday's CPI averaged 0.17% M/M. These could be slightly downgraded if anything following PPI, with only minor inputs (i.e. import prices) still outstanding for August.
- Note that Nomura, who were joint bottom of analyst estimates we'd seen yesterday with 0.13% M/M, actually looked for weaker outturns for PPI airfares (-2.0%) and portfolio management (-1.0%) respectively. That said, more important for changes to PCE estimates will be how pertinent medical care service components developed relative to forecasts.
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