US CPI Preview: Forecasts from eight major banks, inflation peaked but faces challenges to moderate

The US Bureau of Labor Statistics will release the May Consumer Price Index (CPI) data on Friday, June 10 at 12:30 GMT and as we get closer to the release time, here are the forecasts by the economists and researchers of eight major banks regarding the upcoming US inflation print.

The (CP) is forecast to remain at 8.3% after April’s inflation rate dropped from a four-decade high at 8.5% in March. Monthly prices are projected to rise 0.7%, more than double their 0.3% gain in April.

Core inflation, without the food and energy costs that have been in advance of general prices for more than a year, is expected to fall to 5.9% from 6.2% in April. The month’s increase is predicted to be 0.5%, just below the 0.6% gain in April.

Commerzbank

“The inflation rate for May looks set to remain at 8.3%. From April to May consumer prices probably rose by 0.8% (consensus 0.7%). Inflation is not expected to fall below 8% until October. Therefore, pressure on the Fed to raise interest rates sharply is likely to remain high.”

Nordea

“Headline inflation is likely to stay flat printing at 8.3% YoY, while core inflation will fall towards 6.1% YoY with a slight risk to the downside. The primary driver of headline inflation will be energy prices, which are poised to show a large contribution to YoY headline CPI on the back of a 9% gasoline price increase in May. Another contributing factor will be service inflation, which has accelerated on a month-on-month basis and will start contributing more and more to the YoY numbers. Today’s inflation problem began as a surge in goods prices during the pandemic, but it has now turned into sticky and broad-based service inflation, which really highlights the Fed’s delay in withdrawing accommodative policy.”

TDS

“Core prices likely stayed strong in May, with the series registering a second consecutive 0.5% MoM increase. A drag on inflation recently, we now expect used vehicle prices to be a contributor, advancing for the first time in four months. We also look for continued momentum in airfares and shelter inflation. Our MoM forecasts imply 8.4%/5.9% YoY for total/core prices.”

RBC Economics

“US inflation report is expected to show the headline YoY rate little changed after edging lower for the first time in almost a year in April, falling to 8.3% from 8.5% in March. Gasoline prices jumped to almost $4.50 per gallon on average in May – up 49% from a year ago and over 4% (seasonally adjusted) from April. That should push energy inflation even higher. Food prices are expected to have risen at a faster rate again, driven by more expensive farm products and rising processing and transport costs. Higher food and energy prices alone would be enough to make consumers feel the pinch of higher prices, but pressures have been far broader than that. Ex-food and energy (core) CPI growth likely moved a touch lower YoY but should still hold at around 6%. Wages in comparison have still increased more compared to pre-pandemic levels – at 4.7%, annualized growth in average hourly earnings in the US from 2019 still remains above the annualized inflation increase over the same period (4.2%). But the gap is closing, quickly.”

SocGen

“US CPI likely decelerate in May (8.0% YoY from 8.3%), albeit mainly thanks to base effects. Moderation is set to be slow, reinforcing the Fed’s determination to quickly raise the fed funds rates. There was a brief pause on energy price increases in April, but by late May oil prices again surged. These increases are likely to add materially to headline CPI, which we expect to rise by 0.6%." 

NBF

“The food component likely remained very strong given severe supply constraints globally, and this increase may have been compounded by sharply higher gasoline prices. As a result, headline prices could have increased by 0.8% MoM, leaving the YoY rate unchanged at 8.3%. Core prices, meanwhile, should have continued to be supported by rising rent prices and advanced 0.5%. Thanks to a strongly negative base effect, this healthy gain should still translate into a two-tick drop of the 12-month rate to 6.0%. Several indicators for April will also be published, notably consumer credit and the trade balance.”

ANZ

“We expect US core CPI to rise by 0.6% MoM in May and headline to rise by 0.8%. Energy prices rose strongly after a brief respite in April. COVID-sensitive prices, like airline fares and accommodation, are expected to contribute to inflation. So too rents. Our supply-side dashboard suggests goods prices inflation intensified in May. There are tentative signs that labour market conditions are softening, so wage pressures should ease. There is a long way to go before inflation pressures align with the Fed’s 2% target. The Fed is set to hike by 50bp at both its June and July meetings, and probably also in September, as it looks to bring uncomfortably high inflation back to its 2% price stability target.”

CIBC

“With gasoline prices higher in May, total monthly inflation likely accelerated to 0.7%. However, that would still leave the annual rate slightly slower at 8.2%, given base effects. Excluding energy and food prices, core monthly inflation could have decelerated but remained lofty at 0.5%, as high-frequency indicators showed that demand for flights and dining out were held back by the rise in Omicron cases. Higher goods prices tied to the lockdowns in China, and further upside in the shelter component that’s playing catch up to earlier increases in home prices will therefore be behind the monthly increase. Still, base effects will result in a deceleration in the annual rate to 5.9%.”