US Inflation Preview: Experts Anticipate Both Disinflation Progress And Potential Surprises

The upcoming release scheduled for Thursday of the U.S. inflation report by the Bureau of Labor Statistics is stirring anticipation and speculation among market observers.

While the trend of disinflation is expected to continue in July, a potential surprise driven by the base effect looms on the horizon, adding an element of intrigue to the unfolding economic narrative.

The consensus among Bloomberg economists expect the annual CPI rate to rise from 3% to 3.3% in July. Core inflation is expected to remain steady at 4.8% year-over-year. Both are seen surging 0.2% on the month, maintaining the same trend as the prior month.

Analysts Weigh On US CPI

BNP Paribas economists outlined their projections, suggesting the year-on-year change in U.S. consumer prices is likely to register a slight uptick for the first time in a year during July.

Turning the spotlight on core inflation — a metric closely scrutinized by the Federal Reserve — the French bank anticipates a modest 0.2% month-over-month increase, mirroring the June upswing. On an annual basis, their forecast indicates a 4.7% reading for July.

Interestingly, the deceleration in core CPI growth is intertwined with a reduction in the inflationary pressures stemming from home rents. This is attributed to a lag in the translation of the earlier slowdown in market rent growth to lower rent CPI as rental contracts are renewed

J.P. Morgan Chase & Co. JPM chief U.S. economist Michael Feroli suggests the CPI index might witness a 0.2% rise in July, culminating in a 3.3% annual increase. Delving into the core index, which omits food and energy components, Feroli’s estimation points to a 0.17% increase in July, aligning with the momentum observed in June. The core index is projected to land at 4.7% for July, following a 4.8% reading in June.

Chris Holdsworth, chief investment strategist at Investec Wealth & Investment, contends that the upswing in year-on-year inflation for July is unlikely to signify a sustained reversal in trends. He reinforces the notion that the Producer Price Index (PPI) remains a pivotal leading indicator for Consumer Price Index (CPI) inflation, potentially influencing the trajectory of inflation over the coming months.

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