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Jan 15 - 12:55 AM

Goldman Sachs: What We Expect from the US December PI Report

By eFXdata  —  Jan 14 - 04:30 PM

Synopsis:

Goldman Sachs forecasts slightly higher-than-consensus CPI figures for December, with a 0.25% increase in core CPI and a 0.40% rise in headline CPI, driven by higher used car prices, seasonal airfare distortions, and a rebound in shelter costs. Year-over-year inflation is expected to decline in Q1 2025.

Key Points:

  1. Core CPI Forecast:

    • Expected to rise by 0.25% (consensus: 0.2%) and 3.27% year-over-year.
    • Drivers include:
      • Used car prices (+1.0%).
      • Airfares (+1.0%) benefiting from seasonal distortions.
      • Flat communications prices also impacted by seasonal factors.
    • Shelter costs to rebound slightly (OER +0.30%, rent +0.25%).
  2. Headline CPI Forecast:

    • Predicted to increase by 0.40% (consensus: 0.3%) and 2.91% year-over-year.
    • Key contributors:
      • Food prices (+0.35%).
      • Energy prices (+2.3%).
  3. Core PCE Implication:

    • December CPI data is consistent with a 0.18% increase in core PCE.
  4. Q1 Outlook:

    • Year-over-year inflation likely to decline in Q1 2025 due to a falling underlying trend and reduced start-of-the-year distortions.

Conclusion:

Goldman Sachs expects slightly higher-than-consensus CPI prints for December, with inflationary pressures concentrated in used cars, airfares, and shelter. However, the firm projects a moderation in inflation trends as Q1 unfolds.

Source:
Goldman Sachs Research/Market Commentary

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