Based on CPI, PCE outlook turning lower - Nomura

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Apr 15, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
    Likes Received:
    Analysts at Nomura reviewed the U.S. data overnight in fine detail and gauge the PCE outlook as less positive.

    Key Quotes:

    "In the week ending 9 April, initial jobless claims were 253k, a 13k decline from the prior week's revised figure of 266k (previously reported as 267k). In the week ending 2 April, continuing claims were 2171k, an 18k decline from the prior week's revised figure of 2189k (previously reported as 2191k) and a 1k decline from the previous BLS survey reference week in March."

    "The drop in both initial and continuing claims is positive for the US labor markets, but we note that claims data tend to be volatile around holidays (e.g., Good Friday/Easter) so we could see some retracement in the next couple reports. CPI: Headline CPI rose by 0.1% m-o-m in March, lower than market consensus of +0.2% and our forecast of +0.23%. The y-o-y headline CPI inflation inched down to 2.2% from 2.3% previously (Consensus and Nomura: +2.3%)."

    "Energy prices increased by 0.9%, lower than our expectation of +1.5%. Gasoline prices, which accounts for about 40% of energy components, increased by 2.2%, a more moderate increase than we had expected. Moreover, food prices were unexpectedly down by 0.2%, led by a 0.5% decline in foodat-home prices."

    "The decline in food-at-home prices was the largest since April 2009. Stripping out the volatile food and energy components, core CPI inflation slowed to 0.1% (0.069%), falling short of the market consensus of +0.2% and our forecast of +0.14%. After having accelerated to 0.3% in both January and February, core CPI inflation reversed some of the acceleration."

    "As we had expected, inflation of some categories that showed sizable increases in prior months decelerated, as prices for apparel (-1.1%) and hospital services (-0.2%) declined, and new vehicle prices were flat after notable increases in the previous two months. Moreover, the price index for lodging-away-from-home, which tends to be volatile, dropped sharply by 1.8% in the month."

    "At a more aggregate level, core goods prices (commodities excluding food and energy) dropped by 0.2% following relatively high readings of +0.2% in January and +0.3% in February. Given that prices of imported consumer goods remained weak and it takes some time for the lagged impact of the stronger dollar to dissipate completely, the recent pickup in core goods prices was not sustainable, which was confirmed by today’s CPI report. Based on incoming information, we now expect the y-o-y core PCE price inflation, a key metric for monetary policy, to come down to 1.5% in March from 1.7% previously."

    "Beyond March, we look for a gradual pickup in core PCE price inflation toward 1.6% later this year. Read more: US Monthly Inflation Monitor, Special Report, 14 April 2016. Q1 GDP tracking update: Today's weaker-than-expected March CPI report implies that the March PCE deflator will likely be weaker than our previous assumptions. This means, in real terms, more PCE spending than previously assumed for Q1. As such, we revised up our Q1 GDP tracking estimate by 0.1pp to 0.9% from 0.8%, previously."
    For more information, read our latest forex news.

Share This Page

free forex signals