US: Core PCE price index likely increased by 0.2% in August – Nomura

Research Team at Nomura, expects the US headline PCE index likely increased by 0.2% m-o-m (0.9% y-o-y) in August.

Key Quotes

“The relevant elements from the August PPI report for the core PCE price index were positive. Among major items of PPI, the price index for hospital service prices rose moderately in the month. Moreover, the price index for portfolio management services jumped by 2.8% m-o-m. From the CPI, the rise in some goods prices and the acceleration in lodging-away-from home inflation in CPI should push up core PCE inflation in August. However, medical care service prices of the PCE price index are estimated based on the corresponding components of PPI as opposed to CPI. For instance, in August, the price index for hospital services of CPI jumped by 1.7% m-o-m but the PPI’s equivalent index rose only moderately. So, to that extent, medical inflation should make a more modest contribution to core PCE inflation it did for core CPI.

Taking all these factors into account, we think that core PCE price index increased by 0.2% (unrounded: 0.189%) m-o-m in August, pushing up its y-o-y change rate to 1.7% from 1.6%. Based on CPI data, we think that the PCE food prices declined slightly and energy prices were likely flat in August.”