The Year-Ago Base Effects will Cause the Headline and Core Rates to Decline in the US, According to Scotiabank

A sneak preview of what Scotiabank analysts anticipate for Wednesday's US inflation announcement is provided.

August 08, 2022 - 01:06 PM 479 views

The Year-Ago Base Effects will Cause the Headline and Core Rates to Decline in the US, According to Scotiabank

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© The Year-Ago Base Effects will Cause the Headline and Core Rates to Decline in the US, According to Scotiabank

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A sneak preview of what Scotiabank analysts anticipate for Wednesday's US inflation announcement is provided.

Key Quotes

The Cleveland Fed's inflation "nowcast" predicts inflation to be a tenth or two below 9 percent year over year, and it has been significantly underestimating actual CPI inflation for several months.

Additionally, despite certain PMIs showing a decrease in pricing pressure, small businesses are not.

Other drivers are a bit inconsistent.

Year-ago base effects will move toward pushing down the headline and core rates by perhaps a half percentage point or somewhat less in both situations.

Seasonality tends to be minimal in July.

Owners' equivalent rent will undoubtedly remain high as long as housing prices remain high.

Retail gasoline prices for all grades decreased by more than 7% m/m NSA and by over 50% in seasonally adjusted terms. The price of natural gas at Henry Hub decreased by around 5% m/m NSA, but the weight on piped gas, which is only 1%, should have little impact.

While new car prices appeared to be fairly steady, used car prices appear to have decreased and are expected to reduce overall inflation by roughly 0.1 percent monthly.

Food consumed both at home and away from home is anticipated to increase by another 1% m/m, but pressures may be easing.

As pent-up demand for services continues to be released, prices are likewise probably to continue rising.

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