US: Expect headline CPI inflation to moderate to 2.1% y/y in December - TDS

Analysts at TDS expect US headline CPI inflation to moderate to 2.1% y/y in December, with prices up a seasonally adjusted 0.1% m/m.

Key Quotes

“Energy prices should be a net negative, led by lower gasoline prices but partially offset by higher natural gas prices. We maintain a cautious view on grocery prices, which have declined in the prior four months. Excluding food and energy, we expect core CPI to print a 0.2% m/m increase after disappointing with a weak 0.1% rise in November. Much of the prior month's weakness, notably in hotel prices, airfares, and physician’s services, is likely to reverse. The exception is apparel where we are cautious on expecting a sharp rebound amid intense retail competition.”

“Our forecast suggests core inflation should stabilize at 1.7% y/y. Going forward, USD weakness and rising commodity prices should provide a net tailwind and allow core prices to firm over the course of 2018 though the process is likely to prove gradual.”