US DATA: Notable How Core Services Beat Driven By Supercore Rather Than Rents
Feb-12 14:45
The lack of an upside surprise from rental inflation within the January CPI report was notable, considering the beat for core CPI was concentrated in non-housing core services (plus core goods) and the Fed is more sensitive to market-based services prices rather than the imputed CPI rents series.
- Within the details, OER printed 0.31% M/M (range 0.28-0.36) after an unrevised 0.31% in Dec, whilst primary rents saw a modest beat with 0.35% M/M (range 0.27-0.32) after a marginally downward revised 0.30% in Dec.
- It left the weighted average of 0.32% M/M in January after 0.31% M/M. The 0.25% M/M in Nov (revised up from 0.23%) is still the only month since Apr 2021 that has been at or below the 0.27% averaged pre-pandemic when looking for a crude look at normalization progress.
- Whilst the Fed is likely to have confidence that housing inflation will continue to moderate considering the pipeline implied by new lease data, progress has been slower than expected and it will need to see mutiple months with softer monthly prints.
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US OUTLOOK/OPINION: Analysts See Close Call Between 0.2/0.3% M/M For Core CPI
Jan-13 14:44
- Wednesday’s US CPI report headlines the weekly calendar, with Bloomberg consensus currently looking for a 0.2% M/M print for core CPI in what’s a close call with a 0.3% M/M.
- Indeed, our initial review of 13 unrounded analyst estimates sees these generally more detailed projections centered around 0.25% M/M for core CPI in December.
- That would be a moderation from the 0.31% M/M in November and four months oscillating between 0.28-0.31% M/M since August.
- Initial core PCE estimates meanwhile point to a softer outright print, averaging 0.21% M/M (initial range of 0.19-0.27), but directionally it's different as it would be an acceleration after a soft 0.115% M/M in Nov. Prior to that soft spot, core PCE had averaged 0.26% M/M in Sep-Oct.
- Tomorrow’s PPI report will no doubt impact core PCE tracking before a greater convergence in analyst estimates after CPI on Wednesday.
- There's a greater difference between unrounded estimates and the broader median when it comes to headline CPI tracking, however. Unrounded analyst estimates average 0.39% M/M, and whilst 20 of 48 Bloomberg estimates look for a 0.4% increase, 24 look for 0.3% and 4 look for just 0.2%, leaving an overall average of 0.33% M/M.
STIR: Around 45bp Of BoE Cuts Still Priced Through Year-End
Jan-13 14:37
Stabilisation away from session lows also evident in GBP STIRs as the day progresses, leaving 44bp of cuts priced through year-end and SONIA futures little changed to -4.5 on the day.
- UK headline flow limited since PM Starmer’s comments that underscored the government’s desire to stick to the fiscal rules and generate growth, while underscoring its willingness to make difficult spending decisions.
- We will hear from BoE’s Breeden again on Tuesday, but as is the case with most of her speeches, there is unlikely to be much on monpol.
- More focus will be placed on comments from dovish dissenter Taylor later in the week, as well as Wednesday’s CPI data.
EQUITIES: US Opening calls
Jan-13 14:25
US Cash open is set for a steady, stable start with futures mostly trading in a holding pattern for the past 2hours ahead of a very busy Week.
- Calls: SPX: 5,791.0 (-0.6%); DJIA: 41,917 (-0.1%/-22pts); NDX: 20,645.5 (-1.0%).
