Preview: Due August 12 - U.S. July CPI - Another subdued month, if less so than June
We expect a subdued July CPI, up by 0.1% overall and 0.2% ex food and energy, with the respective gains before rounding being only 0.06% and 0.19%. This will however be less weak than June’s 0.4% decline overall, with the June core rate ex food and energy having been unchanged.
Weekly data on gasoline shows that prices fell to their lowest level since mid-March in the first week of July before subsequently moving higher, but this still leaves gasoline prices in July averaging less than they did in June. We expect gasoline to lead a 1.9% fall in energy, following a 5.7% decline in June. We expect food to see a moderate 0.2% increase for a third straight month.
There were two main factors in the exceptional softness of June’s core rate. Firstly, a 2.3% increase in lodging away from home, which is a volatile component and we expect to see a partial reversal here. The World Cup may be an upside risk, but had little visible impact in June. Secondly motor vehicle insurance fell by 2.0%, a second straight sharp fall. Here we expect little change in July, consolidating but not extending recent weakness. Lower energy prices mean some downside risk in air fares, so we expect a second straight decline in transport services overall.
Generally we expect a subdued picture from the remainder of core CPI, with apparel having scope to extend a decline in June that followed four straight gains. We do not expect a significant impact from autos. We expect goods ex food and energy to fall by 0.06% and services less energy to rise by 0.27%. Excluding food, energy and shelter we expect a rise of only 0.10%, after a fall of 0.12% in June.
We expect yr/yr CPI to slip to 3.4% from 3.5%, which would be the slowest since March but still above pre-war levels of 2.4% seen in January and February. We expect the yr/yr ex food and energy rate to fall to 2.5% from 2.6%, which would match the outcomes of January and February, which were the slowest since March 2021.
