Whether it is a senior Wall Street bank or a scattered global investor, today may set the “alarm clock” again, waiting for the arrival of 20:30 Beijing time…
The U.S. Labor Department is scheduled to release high-profile inflation data for August tonight. Many Wall Street analysts now expect the year-on-year increase in U.S. CPI data to ease further in August as gasoline, used car and hotel prices fell further during the month. If so, it would mark the second straight month of slowdown since U.S. inflation surged to a 40-year high in June.
According to the median forecast in a media survey of economists, U.S. CPI is expected to rise by 8.1% year-on-year in August, down from 8.5% in July. The month-on-month performance is expected to be flat, after falling 0.1% in July.
The core CPI, which excludes volatile food and energy prices, is expected to rise by 6.1% year-on-year, up from 5.9% in July; it is expected to rise by 0.3% month-on-month, following the same 0.3% rise in July.
The release date of the U.S. CPI data in August is quite sensitive, because the Fed will hold its September interest rate meeting in just one week, which means that tonight’s data will be the last major economic news before the Fed’s decision. index. Right now, the Fed is in the “silent period” that is customary before the meeting on interest rates.
Investors with a good memory may recall that June was precisely the burst inflation data released during the “silent period”, and the Fed finally changed its original plan and made a 75 basis point increase for the first time in decades. Radical decision on interest rates. Now, when U.S. inflation is beginning to show signs of peaking, will another inflation data released during the “silent period” affect the Fed’s decision to aggressively raise interest rates? People will obviously wait and see…
Multiple signs show that: US inflation will fall for the second consecutive month?
On Thursday (September 8) local time, U.S. Treasury Secretary Janet Yellen said that lower gasoline prices could put further downward pressure on the overall U.S. CPI in August, although she was constrained by the Russian-Ukrainian conflict and the ensuing energy crisis. There is still a lot of uncertainty about the long-term U.S. inflation outlook.
Yellen’s remarks can actually be regarded as a “prediction” of the CPI data tonight by the US policy makers. In the inflation report released tonight, the decline in gasoline prices may become a key theme.
National unleaded gasoline prices have fallen from $4.22 a gallon at the end of July to $3.84 a gallon at the end of August, a drop of 9%, according to the American Automobile Association (AAA). Fears of a recession, coupled with reduced driving and eating out, have pushed oil prices lower.
“This trend has helped gasoline prices fall steadily for three straight months, and as the decline continues, more (regional) markets may soon see prices below $3 a gallon,” said AAA spokesman Gross.
Of course, although gasoline has received the most attention, the areas where U.S. prices are expected to fall in August are obviously more than that. Airfare prices have also fallen, according to information from online travel site Hopper. The cheapest economy-class fare on U.S. domestic flights fell to $277 in August from $312 in July, an 11% drop, Hopper data showed.
Similar areas include used cars and hotels. Wholesale prices for used cars, which had soared during the pandemic, fell 4% month-on-month in August, one of the largest declines on record, according to Manheim.
According to analysis firm STR, hotel prices fell 4.6% in August from July. While month-on-month price declines in August are common in the hotel industry, this time the declines outpaced the pre-pandemic average of 2%-3% for the same period.
If the above-mentioned key areas where prices are expected to fall can be confirmed in tonight’s official inflation report, then the year-on-year increase in CPI in August further fell from 8.5% in the previous month to the market’s expected 8.1%, while the month-on-month price was flat or even further down. It’s really promising.
Investors betting on inflation peaking, however, can’t sit back and relax just yet. In fact, there are still many areas where prices are still accelerating in August, and the food and health care industry may be one of them – tonight’s data is likely to show that food prices continued to soar in the past month, a series of Prices of goods and services are still well above where they were a year ago.
“Falling fuel prices are driving a slowdown in inflation, but there is still significant upward price pressure in important categories such as food, household goods and healthcare products,” said Harvard Business School professor Alberto Cavallo, who created a tracker in 2008 A “billion price” index of the value of consumers’ online transactions. “We’re not completely out of the woods yet,” he said.
A list of investment bank forecasts: How do Wall Street institutions view tonight’s CPI data?
Judging from the estimated distribution of the 39 institutions surveyed by the media, the lowest forecast for the US CPI year-on-year data tonight is 7.9%, and the highest forecast is 8.3%. Most industry insiders’ forecasts are concentrated in the range of 8.0-8.1%. Inside.
This range distribution actually shows two things, that is, once the CPI increase in August is the same as the previous month’s 8.5%, or the CPI in August suddenly drops to the “7 era” (below 8.0%), it will be “absolutely”. “An unexpected scenario. These two scenarios, which most investment banks consider unlikely, could cause an immediate uproar in the market.
The following is the forward-looking interpretation of some investment banks on tonight’s CPI data:
Societe Generale
Due to the slump in gasoline prices, we expect the overall CPI to drop by 0.1% month-on-month in August; the year-on-year increase in the US CPI peaked at 9.1% in June, dropped to 8.5% in July, and should further fall to 8.1% in August. We expect year-on-year CPI growth to fall below 7% by the end of the year, but uncertainty over energy prices clouded that forecast.
On the core CPI front, we expect core CPI to be 0.4% m/m in August, based on a 0.6% increase in housing costs, offset by weakness in clothing, autos and public transport. In addition, we expect vehicle prices to weaken in the coming quarters, but inventories remain tight, constrained by semiconductors, meaning more uncertainty in monthly data forecasts.
Goldman Sachs Group
We expect the core CPI to increase by 0.32% in August, which will push the core CPI to 6.1% year-on-year, 0.2 percentage points higher than the previous month. Our forecast reflects lower oil prices (we assume a 5% q/q decline) and price weakness in the auto category (+0.75% q/q for new cars, -1.25% q/q for used cars, and flat spare parts), primarily due to easing supply chain bottlenecks and dealerships The release of the 2023 model year for sale.
However, service sector inflation is expected to continue to strengthen due to wage pressures, labor shortages and rising short-term inflation expectations. Specifically, we expect housing data (rent +0.65%) to remain strong, with education prices rising 0.6% due to higher tuition and daycare costs in the new school year. We also expect auto insurance prices to rise again as insurers increase prices to offset higher repair and replacement costs. We expect the headline CPI to drop by 0.13% mom in August, reflecting lower gasoline prices but higher food prices.
Commerzbank
Overall, we expect the monthly CPI rate to remain flat in August, and the annual rate of CPI growth may fall back to 8.1%. While the inflation peak may have passed, it’s too early to lift the alarm. This is because the main reason for the recent decline in inflation is unstable factors such as energy prices. In contrast, rents, the most important component of the CPI, are likely to continue to rise sharply for now. As a result, core CPI should rise to 6.2% in August.
ANZ Bank
We expect the U.S. core CPI to rise by 0.4% month-on-month in August, and the monthly rate of overall inflation to remain flat, with falling energy prices dragging down the overall inflation rate.
FuGuo bank
We expect U.S. CPI growth to slow further in August. The U.S. CPI is expected to drop 0.2% month-on-month in August, the largest monthly decline since the spring of 2020. A further drop in gasoline prices is expected to lead to a decline in the headline CPI, while areas such as travel services should help keep the core CPI at 0.4% month-on-month.
We expect the Fed to be encouraged by the continued decline in inflation since June, but core CPI will continue to be well above the Fed’s target. Lower commodity prices and easing supply chain bottlenecks in recent months point to inflation cooling in the coming months, but labor cost growth remains strong, suggesting it will not be easy to bring inflation back to the Fed’s target.
Global Market Focus: How will CPI affect the Fed’s decision tonight?
Although people in the industry generally believe that tonight’s US CPI data is expected to fall for the second consecutive month, it is not easy for investors to judge what changes the data will bring to the financial market.
One of the most important reasons is that the market has generally believed that the Fed will raise interest rates by 75 basis points at this month’s meeting on interest rates. In other words, unless tonight’s data is well below the median market forecast (such as going back to the 7 era), it will be difficult to easily change the Fed’s decision to raise interest rates this month. Inflation data that is in line with or slightly better than expected may have limited boost to risk assets in the market.
The pricing of the CME Group’s Fed Watch tool shows that the probability of the Fed raising interest rates by 75 basis points this month is as high as 91%, which will mark the third consecutive meeting of the Fed to raise interest rates by 75 basis points. Those expectations were reinforced after Fed Chairman Jerome Powell on Thursday reiterated that policymakers would not back down and some officials on Friday expressed support for another sharp rate hike.
Federal Reserve Governor Christopher Waller pointed out in his speech last Friday that it is too early to conclude that inflation is falling significantly and persistently. He is in favor of another sharp rise in interest rates this month. St. Louis Fed President Bullard also said in an interview with the media last week that even if inflation data slowed in August, it may not change the Fed’s path, and he is inclined to raise interest rates by 75 basis points in September.
Investors in the U.S. stock market seemed somewhat optimistic as of Monday. All three major indexes posted gains for a fourth straight session, extending last week’s gains. The U.S. Treasury market, on the other hand, remained relatively cautious, with interest rates on policy-sensitive 2-year U.S. Treasuries still at their highest levels since November 2007.
According to industry statistics, among the eight U.S. CPI release days so far this year, the S&P 500 fell five times and rose three times, with an average decline of 0.5%.
For tonight’s market performance, Gang Hu, an inflation trader at New York-based hedge fund WinShore Capital Partners, said, “The market has changed quite a bit since the last CPI report in the United States, and the market is definitely expecting future inflation data to be stronger than before. Quite a big drop. If those numbers do materialize, you could see a relief rally in bonds and stocks, but I don’t think that relief rally will last.”
He focused on reminding investors to pay attention to the performance of the core CPI, “The Fed will raise interest rates by 75 basis points next week, and interest rates will reach more than 3%. But core inflation will stabilize around the wrong level, if inflation in the next three to four months If the rate is around 0.3%, then the Fed’s job is not done, and the Fed will have to continue. We don’t know how far the Fed has to go, or when it will be enough.”
Hu is not alone in holding this view. Robert Conzo, CEO and managing director of The Wealth Alliance in Melville in New York, also noted that while he believes the CPI is on a downward trend, the extent to which this happens and how sticky inflation is likely to remain is still unknown. He said in an email that once those trends become more pronounced, it will give the Fed a firm direction.