US INFLATION
Pre-CPI estimates for core PCE were for 0.22% M/M, which doesn't look like it will be much changed until after we get the PPI results. There's no doubt that some of the components that were strong in CPI mean PCE marked-to-market estimates should be nudged up, but really depends on what assumptions analysts make about PPI components. and even potentially seasonal adjustments thereof.
- Nomura for instance has upped its core PCE estimate to 0.276% M/M vs 0.259% pre-CPI (they'd seen 0.27% core CPI and 0.27% supercore so already on the high end of consensus). But for PCE they pencil in solid increases in PPI specific contributions, including portfolio +2% M/M, whereas they see airfares declining 2% M/M (NSA, with a seasonal adjustment potentially playing a major factor), and PPI healthcare services up just 0.2% M/M (again NSA).
- TD Securities - which had a 0.24% core M/M and 0.20% supercore estimate - now sees core PCE at 0.20%. ("As was the case in August, we don't expect the core CPI's strength to fully translate into the PCE measure given differences in scope, weights, and methodologies.")
- Wrightson ICAP: "Our forecast for the core PCE price index is still 0.2% but is now in greater danger of rounding up to 0.3%."
- So, there remains a debate on how PCE will land. The dovish-leaning case for Friday's release is that the PPI components result in core PCE printing in the low 0.2%s, which isn't dovish versus the pre-CPI case - but it's dovish vs the upside surprises in core CPI and supercore. Strong PCE-relevant subcomponents would send a more hawkish message.
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