July CPI Preview
July Headline CPI is expected to increase 0.4% following a 1.1% June increase. Core CPI is expected to increase 0.2% after a 0.3% gain prior. Y-o-Y Headline CPI is expected to grow marginally to 5.1% and Core CPI is expected to be unchanged at 2.4%.
Energy prices are once again expected to be the main contributing factor to the expected increase, though this impact will be considerably less compared to recent data as energy prices pulled back near the end of the month. Consumer energy prices grew 6.6% in June following a 4.4% increase in May. Gasoline prices grew 10.1% after a 5.7% increase in May. Petroleum import prices grew 4% in July and Natural Gas import prices rose 5.8%.
Food prices should have a limited impact on July CPI but there is upside risk from the July Ag-Price Index which increased 1.9%, and the July Ag- Export Price Index, which rose 6.7%. Food prices, representing roughly 15% of CPI, grew 0.7% in June following a 0.3% rise in May and a 0.9% increase in April.
July Core CPI is expected to remain muted with shelter, medical care and vehicle prices all expected to post marginal increases over the period. There is the threat of pipeline inflation sneaking its way into core prices as firms must eventually compensate for higher energy prices.
The July CPI data are likely to reflect a near-term peak in consumer prices, as the recent sell-off in energies should help drag y-o-y inflation figures significantly lower going forward.