UIS: Inflation surprises to the upside in August

UOB Group’s Senior Economist Alvin Liew and Rates Strategist Victor Yong review the latest release of US inflation figures.

Key Takeaways

“US headline consumer price index (CPI) inflation was off from recent highs but still elevated at 8.3% y/y (from 8.5% y/y in Jul), above Bloomberg estimates of 8.1% (but in line with our forecast). On a m/m basis, the headline CPI picked up pace, increasing 0.1% m/m (versus flat at 0% in Jul) and faster against Bloomberg estimate of a decline by -0.1% m/m.”

“A bigger concern was the core CPI inflation (which excludes food and energy) which raced higher sequentially, reflecting unabating underlying momentum for price pressures. On a m/m basis, core inflation rose by a faster 0.6% in Aug (up from 0.3% in Jul, and above Bloomberg estimate of 0.3%). Compared to a year ago, it rose to 6.3% y/y in Aug, from 5.9% in Jul, and above Bloomberg estimate for 6.1%.”

“Goods inflation eased further, coming in at -0.8% m/m, 12.1% y/y in Jul (from -0.5% m/m, 12.1% y/y in Jul), but services inflation – a bigger and thus more important component of CPI – continued to increase and the pace re-accelerated, up by 0.7% m/m, 6.8% y/y (from 0.3% m/m, 6.2% y/y in Jul), matching the previous high of Oct 1982 (6.76% y/y). The sustained increase in services inflation in recent months is a clear indication that wage growth is having a meaningful transmission to price pressures.”

“While the latest US headline inflation was below the 9.1% recorded in Jun, this reflected mainly the decline in gasoline prices but the cost of living is still materially high as shown by the persistent rise of food and shelter costs and services inflation is getting hotter amidst strengthening demand. We maintain our headline CPI inflation forecast to average 8.5% and our core CPI inflation forecast at 6.5% for 2022. Subsequently, we still expect both headline and core inflation to ease in 2023, but it will likely average higher at 3.0% (from previous forecast of 2.5%). The balance of risk on inflation remains on the upside.”

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.