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US January CPI: Disinflationary impulse to persist - TDS

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 19, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    Research Team at TDS, suggests that the disinflationary forces dampening US consumer prices should continue to linger in January, as weaker energy and food prices push the headline CPI down a further 0.1% m/m (down 0.128% m/m at 3 decimal places), marking the second monthly decline in this indicator.

    Key Quotes

    “The expected 5.9% drop in gasoline prices should be the principal driver for the weak headline performance, while food prices should post a modest 0.1% m/m drop (marking the third consecutive drop in this indicator). On a year ago basis, however, favorable base effects should push the annual inflation index up to 1.2% y/y from 0.7% y/y in December.

    Core inflation momentum should also be weak, as the index ekes out another sub-par 0.1% m/m gain (up 0.119% m/m at 3 decimal places). As a result, the pace of core inflation should slip modestly, falling to 2.0% y/y from 2.1% y/y the month before as base effects become less favorable.

    The subdued core CPI performance will be on account of the continued fallout from the strong dollar on core goods costs and some modest slowing in core service costs inflation. The outlook for inflation remains quite weak, as the disinflationary forces continue to make their way through the price channel. Given this, we expect the pace of core inflation to slow further in the coming months, falling to 1.7% y/y by year-end.”
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