Synopsis:

Goldman Sachs anticipates a moderate increase in core CPI for August, forecasting a 0.23% rise, slightly above consensus. The firm expects core CPI to be up 3.2% year-over-year. The projection incorporates expected rebounds in specific categories like airfares and more moderate declines in car prices. Overall, headline CPI is expected to rise 0.18%, driven by higher food prices and lower energy costs.

Key Points:

• Core CPI Forecast:

  • Monthly Increase: Expected to rise by 0.23%, surpassing the 0.2% consensus estimate.
  • Yearly Increase: Forecasted to be 3.2%.

• Recent Trends:

  • Previous Months: Core CPI rose 0.16%, 0.06%, and 0.17% in the last three months, with significant declines in autos and airfares contributing to lower increases.

• August Expectations:

  • Used and New Car Prices: Anticipated to decline moderately, with used car prices down by 0.5% and new car prices down by 0.1%.
  • Airfares: Expected to rebound by 1.5% due to seasonal factors.
  • Shelter Costs: Moderation expected, with Owner's Equivalent Rent (OER) rising by 0.33% and rent by 0.29%, following larger increases in July.

• Headline CPI Forecast:

  • Monthly Increase: Expected to be 0.18%.
  • Drivers: Higher food prices (+0.3%) and lower energy prices (-0.7%).

Conclusion:

Goldman Sachs expects a slight upward surprise in core CPI for August, reflecting modest rebounds in specific categories and a moderation in shelter costs. The headline CPI is projected to show a small increase, with higher food prices offset by lower energy costs.