US CPI Preview: Forecasts from four major banks

The US Bureau of Labor Statistics will release the May Consumer Price Index (CPI) data on Friday, June 10 at 12:30 GMT and as we get closer to the release time, here are the forecasts by the economists and researchers of four major banks regarding the upcoming US inflation print.

CIBC

“With gasoline prices higher in May, total monthly inflation likely accelerated to 0.7%. However, that would still leave the annual rate slightly slower at 8.2%, given base effects. Excluding energy and food prices, core monthly inflation could have decelerated but remained lofty at 0.5%, as high-frequency indicators showed that demand for flights and dining out were held back by the rise in Omicron cases. Higher goods prices tied to the lockdowns in China, and further upside in the shelter component that’s playing catch up to earlier increases in home prices will therefore be behind the monthly increase. Still, base effects will result in a deceleration in the annual rate to 5.9%.”

TDS

“Core prices likely stayed strong in May, with the series registering a second consecutive 0.5% MoM increase. A drag on inflation recently, we now expect used vehicle prices to be a contributor, advancing for the first time in four months. We also look for continued momentum in airfares and shelter inflation. Our MoM forecasts imply 8.4%/5.9% YoY for total/core prices.”

RBC Economics

“US inflation report is expected to show the headline YoY rate little changed after edging lower for the first time in almost a year in April, falling to 8.3% from 8.5% in March. Gasoline prices jumped to almost $4.50 per gallon on average in May – up 49% from a year ago and over 4% (seasonally adjusted) from April. That should push energy inflation even higher. Food prices are expected to have risen at a faster rate again, driven by more expensive farm products and rising processing and transport costs. Higher food and energy prices alone would be enough to make consumers feel the pinch of higher prices, but pressures have been far broader than that. Ex-food and energy (core) CPI growth likely moved a touch lower YoY but should still hold at around 6%. Wages in comparison have still increased more compared to pre-pandemic levels – at 4.7%, annualized growth in average hourly earnings in the US from 2019 still remains above the annualized inflation increase over the same period (4.2%). But the gap is closing, quickly.”

Nordea

“Headline inflation is likely to stay flat printing at 8.3% YoY, while core inflation will fall towards 6.1% YoY with a slight risk to the downside. The primary driver of headline inflation will be energy prices, which are poised to show a large contribution to YoY headline CPI on the back of a 9% gasoline price increase in May. Another contributing factor will be service inflation, which has accelerated on a month-on-month basis and will start contributing more and more to the YoY numbers. Today’s inflation problem began as a surge in goods prices during the pandemic, but it has now turned into sticky and broad-based service inflation, which really highlights the Fed’s delay in withdrawing accommodative policy.”