The U.S. July CPI report beat estimates
The U.S. July CPI report beat estimates with gains of 0.3% for both the headline and the core, with respective three-digit increases of 0.335% and 0.291%. Analysts now have firm 6-month average price gains of 0.229% for the headline and 0.183% for the core. The upside July CPI surprise reflects big price gains for tobacco, used vehicles, medical care services and apparel, alongside the expected 1.3% energy price gain. The y/y price gains will moderate into August with oil price declines, but will firm again into early-2020 with harder comparisons and cost pass-through of tariff increases in May and September. In August, analysts expect a -0.1% CPI headline figure with a 0.2% core price rise, as energy prices have fallen sharply into the start of the month. Analysts expect the y/y CPI gain to fall to 1.6% from 1.8% in July but the same 1.6% in June. The y/y core price gain should rise to 2.3% from 2.2% in July and 2.1% in June. The headline y/y metric should climb to the 2.3% area into Q1 due to hard comparisons, while y/y core price gains oscillate around the same 2.3%. For the PCE chain price figures, analysts expect the same 0.3% July gains for both the headline and core. Analysts expect the y/y PCE headline gain to rise to 1.5% from 1.4% in May and June, while the core PCE y/y price gain should rise to 1.7% from 1.6% in June and 1.5% over the three months through May.