US CPI Preview: August 2024

Both the headline and core CPI are expected to record further YoY disinflation in August, clearing the way for the Fed to begin a significant easing cycle in August.

In case you missed it, my review of the latest US jobs report is available here.

---

In August, I expect the headline CPI to record YoY growth of 2.48% (2.5%), down significantly from 2.9% in July. This would represent the slowest pace of YoY growth since February 2021 and is below the consensus forecast of 2.6%.

I expect the core CPI to also see slower YoY growth, but to record a more modest reduction, falling to 3.08% (3.1%) from 3.17% in July. This compares to the consensus estimate of 3.2%.

The much larger estimated disinflation in the headline CPI is expected to be driven the CPI energy commodities index, which I forecast to fall from -2.0% YoY in July, to -10.1% in August.

On a seasonally adjusted basis, I expect headline CPI growth of 0.08% MoM, which would see 3-month annualised growth remain below 1% (0.72%) and 6-month annualised growth fall to 1.8% (from 2.5%) to its lowest level since September 2020.

I expect the core CPI to record MoM growth of just 0.10%, which would mark the fourth consecutive month of annualised growth of 2.0% or less. This would see 3-month annualised growth fall to 1.3% (the lowest level since February 2021) and 6-month annualised growth fall to 2.3% (the lowest level since March 2021).

3 key areas to watch

Vehicle prices

After recording persistent declines since 2H22, the Manheim Used Vehicle Value Index has shown some signs of reversing this trend, with a second consecutive month of significantly above average MoM price growth recorded in August.