US: Expect a steady 0.2% increase in the core PCE price index in September – Nomura

Analysts at Nomura are forecasting a steady 0.2% (0.155%) m-o-m increase in the core PCE price index in September.

Key Quotes

“If realized, our forecast would be equivalent to a 1.965% y-o-y gain in September following a 1.959% increase in August. Although core CPI inflation remained weak in September, partly driven by a slowdown in homeowners’ equivalent rent inflation (OER), the relative importance for OER in the core PCE price index is less than in the core CPI. This difference in weights mitigates the negative impact on core PCE from the slowdown in OER inflation.”

“Moreover, PCE-relevant PPI components will likely support core PCE price inflation in September. In particular, PPI’s airline fares increased strongly in September, likely contributing to core PCE inflation.”

“Among noncore components, we expect a 0.1% m-o-m decline in PCE food prices. PCE energy prices likely fell by about 0.5% m-o-m, considering declines in CPI energy prices.”

“Altogether, we forecast 0.1% (0.111%) m-o-m increase in headline PCE price index, which would lower its 12-month change rate to 1.982% from 2.217%, previously.”