US core inflation likely weakened in July on subdued airfares

US core inflation is likely to have weakened in July on declining airfares. In the past few months, airfares have been on a softening trend. More than 5 percent decline is expected to be seen in this index, which is likely to have been a major drag on the core consumer price index, said Societe Generale in a research report. Core CPI is expected to have risen by just 0.104 percent in July.

Apart from subdued airfares, the medical care index is also expected to have eased to a 0.2 percent growth, stated Societe Generale. In June, a significant rise in price of prescription drugs pushed the medical care index higher. This is unlikely to be repeated in July.

Also, costs of education are expected to have eased slightly too, whereas used car prices are likely to have remained negative. Meanwhile, prices of gasoline are expected to have dropped about 5.5 percent non-seasonally adjusted.

“Given our soft core forecast and the drag from energy prices, we expect the July CPI to be flat,” added Societe Generale.

This reading might reduce the annual rate from 1 percent to 0.8 percent, whereas the projection for the core inflation might result in the annual core rate falling to 2.2 percent from 2.3 percent, according to Societe Generale.