US: Core PCE inflation likely to slow to 0.06% in June – Nomura

Analysts at Nomura expect US core PCE inflation to slow to 0.06% m-o-m in June, down from 0.2% in May, likely lowering the y-o-y rate 0.1pp to 1.9% (1.88%).

Key Quotes

“Within the details of core PCE, the contribution from components covered by CPI data are likely to slow, contributing only 2.3bp to the June m-o-m increase after an 18.7bp contribution in May.”

“While rent inflation in the June CPI report increased strongly, the core PCE price index places less weight on rent-related components. PPI-related components are likely to rebound in June, contributing roughly a weak 1bp to m-o-m core PCE inflation in June after a negative contribution in May.”

“For non-core components, we expect a modest 0.2% m-o-m increase in food prices and a 0.3% m-o-m decline in energy prices, consistent with the June CPI report.”

“Altogether, we expect headline PCE inflation to register 0.053% m-o-m in June, corresponding to 2.3% (2.26%) on a 12-month basis, unchanged from the 2.3 y-o-y rate in May.”