US: Headline CPI to rise 0.4% - BMO CM

The shorter-term core CPI inflation trends are turning up in the US, as the negative idiosyncratic factors from earlier in the year are fading, according to Michael Gregory, Deputy Chief Economist at BMO Capital Markets.

Key Quotes

“The three-month change was 2.4% annualized in October, showing steady acceleration since May’s rare flat reading (a zero or negative outcome has occurred only twice before in the past 52 years). The six-month change was 1.8% annualized, also showing steady acceleration since July’s 0.9% reading (which was the slowest in more than half a century, apart from several months in 2010). These accelerating shorter-term trends have finally started turning the dial up on the annual change; it was 1.8% y/y in October, after a five-month trough at 1.7% (both down from 2.3% in January, which matched its highest level since 2008).”

“We expect it will remain at 1.8% y/y in November, but with a 0.2% monthly move the shorter-trends will now be both in the 2%-range, pointing to another dial up in the months ahead. As for the headline CPI, with gasoline prices up sharply amid flattish food prices, we look for it to rise 0.4%, lifting the annual change a couple tenths to 2.2% y/y.”