OIL PRODUCTS: China Traffic Congestion Pulls Out of Lull: BNEF

• Core goods inflation of 0.20% M/M was close to expectations in June (average of 0.18% M/M across seven analyst estimates) after -0.04% M/M in May and 0.06% in April.
• It came despite a slightly larger than expected decline in used car prices (-0.67% M/M vs median estimate of -0.50% or mean of -0.15%) along with new cars also falling -0.3% M/M.
• These large ticket items masked a broader increase in core goods across 56 items for a second month, with a median increase of 0.44% M/M in June after 0.29% in May and -0.01% in April.
• This 0.44% M/M doesn’t materially change anything from a "largest since x" point (now since Aug and not Sep 2022) but is another marked acceleration – see chart.
• For context, this median averaged 0.32% in 2021 and 0.39% in 2022 and peaked at 0.84% in Jan 2022.
• One point of caution: you can see in the second chart below just how many of these series that feed into core goods are NSA.

Fed pricing sees a modest dovish reaction to the CPI data, although the readings provided little differentiation vs. headline BBG survey expectations on net (but did include a 0.1ppt downside surprise for unrounded M/M core CPI & a 0.1ppt upside surprise for unrounded headline CPI).

• Unrounded supercore was pretty close to the average of a limited survey sample, with our macro team noting that it was core services that limited inflation, while core goods provided a slightly hawkish surprise (see previous bullets for greater details on the release)
• A reminder that hawkish adjustments were seen ahead of the data, after Treasury secretary Bessent’s left some feeling that there may have been a more hawkish surprise in the offing.
• We suggested that he may have just been referring to a roughly in-line print given consensus expectations for a move higher across the major CPI metrics vs. May levels. This seems to have been proven true.
• FOMC-dated OIS shows 1bp of easing for this month’s decision, 16bp through September, 31bp through October and 47bp through year-end.
• That compares to 1bp, 15bp, 29bp and 46bp ahead of the data and 1bp, 17bp, 31bp and 49bp before Bessent spoke.
• SOFR-implied terminal rate pricing at 3.22% vs. 3.25% ahead of the data and 3.23% pre-Bessent (corrected from 3.33% when previously published).

Fed pricing sees a modest dovish reaction to the CPI data, although the readings provided little differentiation vs. headline BBG survey expectations on net (but did include a 0.1ppt downside surprise for unrounded M/M core CPI & a 0.1ppt upside surprise for unrounded headline CPI).

• Unrounded supercore was pretty close to the average of a limited survey sample, with our macro team noting that it was core services that limited inflation, while core goods provided a slightly hawkish surprise (see previous bullets for greater details on the release)
• A reminder that hawkish adjustments were seen ahead of the data, after Treasury secretary Bessent’s left some feeling that there may have been a more hawkish surprise in the offing.
• We suggested that he may have just been referring to a roughly in-line print given consensus expectations for a move higher across the major CPI metrics vs. May levels. This seems to have been proven true.
• FOMC-dated OIS shows 1bp of easing for this month’s decision, 16bp through September, 31bp through October and 47bp through year-end.
• That compares to 1bp, 15bp, 29bp and 46bp ahead of the data and 1bp, 17bp, 31bp and 49bp before Bessent spoke.
• SOFR-implied terminal rate pricing at 3.22% vs. 3.25% ahead of the data and 3.23% pre-Bessent (corrected from 3.33% when previously published).