US CPI Preview: August 2023
While August's CPI report could fuel concerns surrounding a 2nd wave of high inflation, leading indicators suggest that there's little reason to be concerned.
Executive summary
Headline CPI growth expected to increase materially in August, but the core CPI is expected to see a material deceleration
I forecast annual CPI growth to rise to 3.7% in August (vs 3.6% consensus) — a material increase from July’s growth of 3.2%. A key driver of the expected increase in CPI growth, is the impact of higher gasoline prices (up 6.7% MoM).
In contrast to the expected jump in the headline CPI, I forecast a material decline in the core CPI — from 4.7% in July, to 4.3% in August (vs 4.3% consensus). The expected decline in annual core CPI growth comes as MoM growth is forecast to record the smallest positive divergence from its historical (2010-19) monthly average, since September 2021.
Spot market rent adjusted inflation measures expected to remain well below 2% YoY
Given the enormous divergence that currently exists between annual spot market rental growth (-1.2% YoY as per Apartment List data in August) and the CPI’s lagging rent of shelter (+7.8% in July), …