US: Expect a 0.11% m-o-m increase in headline CPI inflation - Nomura

Analysts at Nomura expect a 0.11% m-o-m increase in US headline CPI inflation after the core CPI surprised to the downside in September, rising only by 0.1% (0.127%) m-o-m.

Key Quotes

“Many had expected some boost from the hurricanes but the actual impact on September core CPI appeared muted. For instance, we expected damaged homes and scrapped vehicles to have pushed up rent and vehicle prices, but inflation of both items slowed. That said, we cannot rule out the possibility of inflationary pressure arising from the hurricanes being realized with a longer lag than we initially thought. Thus, we expect a slight acceleration in rent inflation in October after a slowdown in the previous month.”

“Moreover, some of prices which dropped sharply in September, such as prescription drug prices, will likely reverse those declines in October. Although vehicle prices, which have strong inertia, might have continued to decline in October, ex-auto core goods prices appear to have increased given the gap between the inflation of imported consumer goods prices and domestic retail prices widened significantly. Overall, we expect core goods and service prices to increase by 0.14% and 0.23% m-o-m, respectively. Altogether, we expect a rise of 0.21% m-o-m in the aggregate core CPI price index. This forecast translates to a 1.8% (1.76%) rise on a year-on-year basis, up from a 1.7% (1.69%) increase in the previous month.”

“On noncore components, we expect energy prices to have fallen, driven by a pullback in retail gasoline prices after a weather-driven surge in September. Further, food prices likely increased at a steady pace, as we expect food-at-home prices to have rebounded. Food-away-from-home prices likely increased at a trend-like pace. Altogether, we expect a 0.11% m-o-m increase in headline CPI inflation, which would translate into a 2.0% y-o-y rate. Our forecast for CPI NSA is 246.680.”