US CPI Preview: Forecasts from 11 major banks, new peak but at headline

The US Bureau of Labor Statistics will release the June Consumer Price Index (CPI) data on Wednesday, July 13 at 12:30 GMT and as we get closer to the release time, here are the forecasts by the economists and researchers of 11 major banks regarding the upcoming US inflation print.

Headline inflation at 8.6% is worrying, but it could get even worse. Economists expect an increase to 8.8% as energy prices continued advancing last month.

Core CPI was already high in June 2021, the figure which now falls out of the series. The calendar is pointing to a drop from 6% to 5.8%. Expectations for the monthly price increase stand at 0.6%.

ANZ

“We expect US core CPI to have risen by 0.5% MoM in June and headline by 1.0%. Higher energy prices explain the gap between headline and core. A 1% MoM rise in CPI inflation in May triggered a 75 bps hike from the Fed in June. But with commodity prices easing substantively since then, there may be less pressure on the Fed to repeat with a 75 bps hike in July as inflation expectations are unlikely to be as worrisome.”

Commerzbank

“We expect consumer prices to have risen 1.2% from May, and 0.5% excluding energy and food. Headline inflation would then reach a new 40-year high of 8.8%. In the coming months, inflation is likely to climb even above 9%.

ING

“The market is favouring a 75 bps rate hike from the Federal Reserve on 27 July and we agree given the tight jobs market and inflation running at more than four times the 2% targeted rate. In fact, inflation is likely to move even further above target this coming week as gasoline, food, shelter and airline fares continue to rise apace. Core inflation may slow marginally to 5.8% from 6%, but this too is well above target.”

RBC Economics

“US CPI likely ticked higher to 8.8% in June on the back of surging food and gas prices. Rent prices have been rising faster over the past year and should continue to support growth in core prices, given its high relative weight.”

Deutsche Bank

“We note that while gas prices fell in the second half of June, the first half strength will still be enough to help the headline CPI print (+1.33% forecast vs. +0.97% previously) be strong on the month but with core (+0.64% vs. +0.63%) also strong. We have the headline YoY rate at 9.0% (from 8.6%) while core should tick down from 6.0% to 5.8%.”

TDS

“Core prices likely stayed strong in June, with the series registering a 0.5% MoM gain. Shelter inflation likely maintained momentum, but we look for airfares to retreat following double-digit m/m expansions in March-May. Separately, we expect gasoline prices to remain a notable force, accelerating to an 11% MoM pace. Our MoM forecasts imply 8.9%/5.7% YoY for total/core prices.”

SocGen

“The core inflation rate is expected to rise 0.4% MoM and 5.6% YoY. The pace is slowing but is not slow enough. Travel costs remain high and are likely to subside in the coming months, but the much greater issue is rents and shelter costs that are likely to continue their upward push and keep a floor on inflation near 4.5%. We expect a decline from the peak to be rapid should energy prices stabilize. A retreat from peak is not enough. The Fed goal is 2%. The Fed acknowledges that it may take a couple of years to return to 2%. Rents are the major factor preventing a return to 2%.”

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 1.2% MoM, lifting the YoY rate to a 40-year high of 8.8%. Core prices, meanwhile, should have continued to be supported by rising rent prices and advanced 0.6%. Thanks to a strongly negative base effect, this healthy gain should still translate into a three-tick drop of the 12-month rate to 5.7%.”

CIBC

“Total CPI inflation likely accelerated to 8.8% YoY in the US. Higher prices at the pump would also feed through to core inflation (ex. food and energy) in the transportation services component, helping to drive a likely 0.6% monthly increase in that group, and leaving annual core inflation at 5.8%. Shelter costs likely continued to add to price pressures, as the lagged impact of higher home prices is captured in the index, offsetting any easing in the pace of used car price growth, or relief in goods prices stemming from the end of lockdowns in China. We are in line with consensus forecast and market reaction should therefore be limited.”

Wells Fargo

“We look for a 1.1% monthly gain for the CPI, which will push the year-ago pace of inflation to yet another fresh 40-year high of 8.8%. June could be the peak in the year-ago pace of inflation, but that will depend highly on how commodity prices play out over the next few months. Even if June marks a peak, we are likely to continue to see very high inflation rates for the next few months through September. When excluding food and energy, we expect core prices rose 0.5% MoM. Core goods prices likely moved higher but at a slower rate in June, while core services are set to moderate a bit after the meteoric rise in travel prices the past few months. Primary shelter costs, however, are expected to advance at a similar pace to May. Core prices should increase around 0.5% in the next few months as the eventual step-down in inflation will be gradual.”

Citibank

“US June CPI MoM – Citi: 1.2%, prior: 1.0%; CPI YoY – Citi: 8.9%, prior: 8.6%; CPI ex Food, Energy MoM – Citi: 0.6%, prior: 0.6%; CPI ex Food, Energy YoY – Citi: 5.7%, prior: 6.0%. Ffollowing another upside surprise to core CPI in May, we expect a similar 0.6% MoM increase in the June data (although just barely at 0.56% unrounded). Very strong shelter prices in May data are likely to persist for at least a few months, and we expect a strong 0.61% increase in primary rents and a 0.57% increase in owners’ equivalent rent in June. The clearest downside risks for CPI in June and over the rest of the year comes from goods prices, particularly auto prices which are a substantial weight in CPI inflation. Generally, goods prices should continue to slow in the coming months as demand for goods eases.”