Preliminary Data Points Towards Another Weaker CPI Print for August - Analyst

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By Senad Karaahmetovic

The U.S. Bureau of Labor Statistics (BLS) is due to release the Consumer Price Index (CPI) data on September 13. Some analysts are expecting another weaker-than-expected print that should help solidify the thesis that inflation peaked in June.

UBS economist Pablo Villanueva shared the results of the preliminary analysis of CPI trends in August. Results point toward a drop in both the ISM and monthly core CPI inflation.

“The UBS Evidence Lab Nowcast expects the monthly core CPI increase to move down to a moderate 0.19% rise in August (lower than the preliminary US Economics team's forecast of 0.41%) from 0.31% in July and well below the 0.55% average of the first six months of the year,” Villanueva wrote in a client note.

UBS Evidence Lab Nowcast is designed to offer an early read on key economic indicators, like ISM manufacturing composite index, auto and light truck sales, the CPI and Core CPI, nonfarm payroll employment, industrial production, private construction, etc.

The weaker-than-expected data is likely to be fueled by lower inflation for cars (both used and new), air travel, and rents.

“For headline CPI m/m SA the Nowcast projects a -0.01% print with energy prices falling. For retail and food services sales excluding autos and gas stations, the Nowcast projects a monthly increase of 0.6% in August, only slightly below the 0.7% monthly increase in July,” the economist added.

As far as nonfarm employment is concerned, UBS projects 382k jobs added, which is way above the consensus of 300k.

Citi economist Veronica Clark also sees easing inflation trends due to falling commodity prices. However, she warns that underlying inflationary pressures remain strong.

“Services price indices in August PMI stabilized and University of Michigan 5-10 year inflation expectations remain within the recent range. As such, our headline inflation forecasts for this year are slightly lower compared to the previous week but with no change in end-of-year expectations for core CPI or core PCE,” Clark said in a client note.