U.S. consumer price inflation likely accelerated in October, core inflation to have rebounded

The U.S. consumer price inflation is expected to have continued to accelerate towards the 2 percent target, whereas core inflation is likely to have rebounded in October. In the previous month, the core inflation had accelerated just 0.11 percent, which was quite lower than the January-August average rise of 0.19 percent. But most of the weakness relative to the forecast of a 0.18 percent increase was focused in the areas of apparel and communications, noted Societe Generale in a research report. The communication index is expected to have risen slightly by 0.1 percent in October, whereas the drop in apparel prices might have eased in October.

Elsewhere, costs of rent are estimated to have accelerated, increasing 0.4 percent, whereas the OER index might have increased 0.34 percent, around the same rate seen in the previous month. In the meantime, medical care index is expected to have risen 0.2 percent in October, whereas the education component is likely to have recorded a firmer gain.

Within autos, prices of new cars are expected to have rebounded 0.1 percent, whereas used car prices might have stayed in the negative territory for the eighth consecutive month. On the other hand, airfares are estimated to have risen 0.4 percent in October, the same as in September. Hotel rates are expected to have climbed 0.9 percent; however, there are certain downside risk to this forecast given its strength in the past two months, said Societe Generale.

If the core rate forecast is realized, the year-on-year core rate might have remained stable at 2.2 percent, although slightly firmer core print would stimulate the year-on-year rate to 2.3 percent. Meanwhile, the energy index is likely to have accelerated by about 2.9 percent in October as prices of gasoline probably grew by around 6.5 percent on a seasonally adjusted basis. On the other hand, food prices are expected to have remained unchanged from the September reading.

“The NSA index may have printed 241.847. That would boost the headline yoy rate from 1.5 percent to 1.7 percent, marking the highest reading since August 2014”, added Societe Generale.