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26 Feb 2015
Downside risks to US inflation – ING
FXStreet (Barcelona) - James Knightley, Senior Economist at ING, views that headline US inflation is set to turn negative in annual terms today, but news headlines of deflation are well wide of the mark, and further anticipates US CPI to come out below consensus at -0.4% yoy.
Key Quotes
“US consumer price inflation has been heavily depressed by the plunge in the price of oil, so much so that today’s January headline rate is likely to fall into negative territory for the first time since 2009.”
“The market anticipates a reading of -0.2% YoY, but we see a little more downside risk and predict a -0.4% YoY outcome. For some, this is evidence of deflation, but we do not agree.”
“In terms of the broad categories within CPI, just 10.5% of the basket by weight is actually seeing price falls. This is made up of energy commodities, which are 4.7% of the CPI basket by weight, apparel, which is 3.5%, and used car & track prices (1.6%) along with airline fares (0.7%). It is just that the energy component is seeing such a substantial fall of 20.5% YoY as of December 2014, which is dragging the headline index lower.”
“Moreover, the core rate of inflation (excluding food and energy prices) is expected to remain at 1.6% YoY today, house prices are still rising in annual terms and the stock market is at new highs.”
“There is no evidence of broad-based price falls, which is the usual requirement to say there is deflation.”
Key Quotes
“US consumer price inflation has been heavily depressed by the plunge in the price of oil, so much so that today’s January headline rate is likely to fall into negative territory for the first time since 2009.”
“The market anticipates a reading of -0.2% YoY, but we see a little more downside risk and predict a -0.4% YoY outcome. For some, this is evidence of deflation, but we do not agree.”
“In terms of the broad categories within CPI, just 10.5% of the basket by weight is actually seeing price falls. This is made up of energy commodities, which are 4.7% of the CPI basket by weight, apparel, which is 3.5%, and used car & track prices (1.6%) along with airline fares (0.7%). It is just that the energy component is seeing such a substantial fall of 20.5% YoY as of December 2014, which is dragging the headline index lower.”
“Moreover, the core rate of inflation (excluding food and energy prices) is expected to remain at 1.6% YoY today, house prices are still rising in annual terms and the stock market is at new highs.”
“There is no evidence of broad-based price falls, which is the usual requirement to say there is deflation.”