US CPI inflation likely to have risen in June 2018

11 / 07 / 2018 | Market News
On Thursday July 12th  2018 the United States Department of Labour Statistics is going to publish data regarding the US Consumer Price Index (CPI) and the core CPI inflation during June 2018. The CPI is an indicator used to measure the rate at which the prices of goods and services bought by households rise or fall, which is the rate of inflation, referred to as the CPI inflation. The CPI inflation figure is taken into consideration by the US Federal Reserve (Fed) board when it evaluates its monetary policy.

Economists polled by the Wall Street Journal (WSJ) on July 3rd 2018 said they expect the data to show that the US CPI inflation rose to 2.9% in June 2018, on an annualised basis. The CPI inflation stood at 2.8% in May 2018. On a month-to-month basis, they anticipate that CPI inflation increased by 0.2% matching May’s 2018 reading. The US Bureau of Labour Statistics is also going to release data regarding the core CPI inflation. According to the majority of economists polled by the WSJ, core CPI inflation will likely tick higher, coming in at 2.3% on an annualised basis. The reading is expected to be slightly higher than the 2.2% figure recorded in May 2018. The core CPI inflation measures the price movements by the comparison between the retail prices of a representative shopping basket of goods and services. In order to measure the core CPI inflation, analysts are excluding the prices of volatile products such as food and energy to capture an accurate calculation. 

The 2.8% CPI inflation figure recorded by the US Department of Labour Statistics in May 2018 was the highest reading since February 2012. The report that accompanied the data said that rising prices for gasoline and shelter led the inflation rate upwards. More specific analysts noted that “the indexes for gasoline and shelter were the largest factors in the seasonally adjusted increase in the all items index, as they were in April 2018. The gasoline index increased 1.7%, more than offsetting declines in some of the other energy component indexes and led to a 0.9% rise in the energy index.” 

Nomura, which is one of the largest financial services group headquartered in Asia, released a report on July 9th 2018 regarding the US CPI inflation. Economists at Nomura suggested that core CPI inflation increased by 0.2% on a month-to-month basis in June 2018, slightly above the 0.17% pace in May 2018, but essentially the same as its six-month average. Regarding the US headline inflation rate in June 2018, Nomura’s analysts noted that “the US June headline CPI to rise by 0.2% (0.212%) m-o-m, pushing up its 12-month change to 2.9% (2.94%) from 2.80% previously. Some of the negative payback from unusually large increases of certain components in May, such as prescription drug and lodging-away-from-home prices, will likely be offset by higher airline fares and a smaller decline in used vehicle prices.”

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