United States: CPI Preview - Gasoline rises again, with rents still firm

Key arguments

• Headline CPI is forecast to accelerate to 0.4% MoM in August from 0.1% in July, driven mainly by higher gasoline prices and firmer rents, while core CPI rises to 0.3% MoM from 0.2%, slightly above the 0.2% consensus.
• Motor fuel is expected to rise about 2.9% MoM after a 3.0% decline in July, adding roughly 0.12 ppt to headline inflation, supported by EIA weekly regular gasoline prices up 3.2% MoM and higher crude and refined product prices, particularly heating oil futures.
• Shelter is forecast to rise 0.35% MoM and contribute about 0.12 ppt to headline inflation; July's soft 0.1% reading was distorted by a decline in lodging-away-from-home prices, and a rebound is likely given rent of primary residence and OER both rose 0.3%.
• Firm medium-term housing inflation is supported by Zillow's July asking rents up 2.3% YoY, bank credit up 0.47% MoM in August, and private sector wages up 0.85% QoQ in Q2.
• Food prices are expected to rise 0.3% MoM and household energy 1.0% MoM, while medical care slows to about 0.2% MoM and education and communication is the only component forecast to subtract from headline CPI, down 0.10% MoM and -0.005 ppt.
• The three-month moving averages for headline and core CPI would remain contained at 0.02% and 0.16%, leaving the Fed comfortable with the inflation pace; OCBC maintains its forecast for an unchanged Fed funds rate in September unless there is a significant upside surprise.

Corresponding source evidence

1. Our forecast is 0.4% MoM for headline CPI and 0.3% for core, with previous numbers at 0.1% and 0.2% respectively.
2. We see headline CPI at 3.4% YoY and core at 2.5%, matching July's numbers.
3. • Three-month moving average for headline and core CPI would be contained at 0.02% and 0.16% even if our forecasts materialised.