With US inflation as a concern, CPI in focus - Nomura

While inflation in the US is a hot topic and of concern, analysts at Nomura offered their preview of US CPI that will be a key focus.

Key Quotes:

"Retail gasoline price data indicate prices fell from January to February. Moreover, futures prices suggest a sharp decline in natural gas prices. Against this backdrop, we expect a modest decline in aggregate energy prices. 

On the other hand, we expect food price inflation to have grown slowly. There was little evidence of inflationary pressure in food-at-home prices, although food-away-from-home prices (the other subcomponent of food prices) appear to have increased steadily, reflecting tighter labor markets in the restaurant industry.

Taking these subcomponents into account, we expect only a slight increase in aggregate food prices in February. Excluding these non-core components, our forecast for February core CPI inflation is a 0.2% (0.177%) m-o-m increase.If realized, this rate would be slightly lower than the 0.308% increase in January, which was driven by a strong surge in core goods prices. It is worth noting that this strong increase was concentrated in a few categories of goods, which portends to some mean reversion. 

However, the back-to-back increases in imported core consumer goods prices in February and January suggests that the recent pick-up in core good prices may be sustaining. As for services, we expect a steady increase in core service inflation, which was up 0.273% m-o-m in January.

Altogether, we expect a 0.076% m-o-m (2.678% y-o-y) increase in the headline CPI and 243.462 for CPI NSA in February. Note that our forecast is subject to the PPI report, scheduled for release on 14 March."