US CPI Prep

On Wednesday the 13th of November, at 08:30 ET, the BLS is set to release the latest US CPI report for the month of October.
Here are some views on what to expect.

Overview
Estimates subject to change
For headline US CPI YoY, median forecasts see it moving up to 2.6% from 2.4%.
According to a survey of 30 qualified economists, the highest estimate is in line with the median, at 2.6%, while the lowest sees it remaining unchanged at 2.4%

For US CPI MoM, the median forecast sees it remaining unchanged at 0.2%.
The highest estimate is 0.3%, and the lowest is 0.1%.

For US Core CPI YoY, median forecasts see it remaining unchanged at 3.3%.
The highest estimate is 3%, the lowest is 3.2%.
Core MoM is also expected to remain unchanged at 0.3%. The highest estimate is in line with the median view of 0.3%, the lowest is 0.2%.

Here are some views from some of the largest investment bank forecasters.

General Expectations
If CPI comes in higher than expected, indicating higher than anticipated inflation in the US, we would expect to see weakness in US stocks and strength in the dollar and government bond yields, as traders begin to price in the reduced chances of US interest rate cuts at the upcoming meetings.

If CPI comes in lower than expected, we would expect to see strength in US stocks and weakness in the dollar and government bond yields, as traders increase/solidify their bets on future Fed rate cuts.

Commentary
ANZ
We expect core Consumer Price Index (CPI) inflation to have risen 0.33% m/m, in October, suggesting underlying pricing pressures remain a little elevated. Weaker gas prices will result in headline inflation rising by 0.18%. In year-on- year terms, we expect core CPI inflation to remain at 3.3% and headline to rise to 2.6% from 2.4%. Core inflation surprised to the upside in September, rising by 0.31% versus an expected 0.2%. This was driven by volatility in some items, like air fares. Statistical analysis of CPI price data shows a broad-based disinflation trend is firmly in place. Our one-month Diffusion Index has been negative for five straight months. A reading below zero implies a disinflationary trend is in place. Wholesale prices suggest used car prices will rise sharply, potentially over 2% m/m, in October. We estimate core goods inflation will rise by 0.3% in October. Unit labour costs were running at 3.4% y/y in 3Q 2024, the fastest pace since late 2022. The relatively high level of ULC highlights that inflation risks remain, particularly for core services ex-housing inflation.

Wells Fargo
The October CPI report will likely support the notion that the last mile of inflation’s journey back to target will be the hardest. We look for the Consumer Price Index to have advanced 0.2% in October, causing the year-over-year rate to edge back up to 2.5% from 2.4% last month. Excluding food and energy, a third consecutive 0.3% monthly increase is expected to keep the core index up 3.3% year-over-year—still about one percentage point higher than its pre-pandemic pace.

A number of upside risks remain in the near to medium term, however, including a pullback in labor supply, deglobalisation’s impact on import prices, the potential for worsening conflict in the Middle East and still-strong demand. Many of the policies proposed by President-elect Donald Trump on the campaign trail are likely to contribute to these pressures and extend the journey back to the Fed’s target, if not lead to a re-acceleration in price growth over the next year or so, in our view.

Barclays
We think core CPI will rise 0.30% m/m (3.3% y/y) in October, near September’s pace, reflecting upswings in the used car and lodging components. We think the ex-housing core services inflation (“supercore”) component slowed only somewhat from September’s elevated print, with October’s 0.3% m/m pace still about 0.1pp above the pre-pandemic run rate. We think that details on PPI service prices will point to a 0.26% m/m (2.8% y/y) increase in the core PCE deflator, implying a second-consecutive month of firmness in the Fed’s preferred inflation measure following a series of encouragingly soft summertime prints. Meanwhile, we think hurricane- and strike-related disruptions weighed, once again, on industrial production, with the headline declining 0.3% m/m for a second-consecutive month and manufacturing down another 0.5% m/m. With these influences now unwinding, industrial activity seems positioned for a strong November rebound. Our indicators suggest that this was not the case for retail sales, which were lifted 0.5% by a strong auto sales and by a solid 0.3% m/m gain in the control group category following Amazon Prime big Deal Days event in early October.

Bank of America
We forecast headline CPI to increase by 0.1% m/m (0.13% unrounded and 2.4% y/y) in October. Energy prices are likely to fall again as gas prices continued to decline. Meanwhile, core CPI should advance by 0.3% m/m (0.26% unrounded and 3.3% y/y). This would be a slight moderation from September owing in large part to a more muted rise in core goods prices.

Previous Release
On October 10th at 08:30 ET, the BLS released the US CPI report for the month of September.
US CPI YoY came in higher than expected at 2.4%, up from the forecast 2.3%.
Core CPI YoY came in higher than expected at 3.3%, up from the forecast 3.2%.
CPI MoM came in higher than expected at 0.2%, up from the forecast 0.1%.
Core CPI MoM came in higher than expected at 0.3%, up from the forecast 0.2%.
This resulted in weakening for the Dollar, stocks and Treasury Yields.