It's July people. Auto production always goes haywire in July because of annual retooling shutdowns. But the effects are always fully reversed in August.
Paul Ashworth
@FCVMacro
Chief Data & Modelling Economist
Capital Economics
Capital Economics
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Our post-CPI estimate that the core PCE deflator increased by 0.19% m/m in June has, post-PPI, been cut to only 0.12% m/m. In addition, we think that May’s increase could be trimmed from 0.08% to 0.05%. That would be enough to pull the annual core PCE inflation rate down to 2.5%.
About that "last mile is the hardest" nonsense. Remember rent of shelter accounts for 43% of the core #CPI basket. So if it does fall from 6.2% in Dec to -1% that would subtract 3.1% points, leaving core CPI Inflation at sub-1% by end-2024. Jan rate cut maybe?
We're Team #PCE rather than #CPI, but there's a possible upward revision to the portfolio management component coming that could add 0.14% to the core PCE inflation rate.
The collapse in the NY Fed manufacturing index to -43.7 in Jan is going to attract a lot of attention from the perma bears, but we'd caution it's more likely noise rather than signal.
