MACRO ANALYSIS: MNI US Macro Weekly: Data Takes Backseat To Fed Chair Intrigue

Source: Bloomberg Finance L.P./MNI 

• With data quality concerns and data dissemination uncertainty particularly elevated for this week’s CPI release (complicated by the missing October values), it’s important to remember that we’re starting from a poor base for data quality in particular.
• 40% of the commodities and services price survey source data for the September CPI report was based on a “different cell” rather than its “home cell” in September, a new high after 36% in August. That September CPI report shouldn’t have been affected by the government shutdown, with its collection period coming earlier enough, and it instead extended what had already been a marked increase in different cell imputation since the start of this year reportedly owing in large part to budget and staff cuts.
• A historical average is closer to 10%, although it jumped to circa 30% from April where it then saw a range of 29-36% until August before the latest push higher to 40% in latest data. For context, it peaked at 15% in the pandemic when in-person surveys weren’t possible.
• On top of this, some are concerned that the collection period for this week’s report, covering the second half of November and therefore Black Friday promotions, could have biased some core goods readings lower in particular. 

Core Goods Acceleration vs Steady Core Services

Broadly keeping to our usual format, we look at what analysts expect to see for some of the more important M/M categories or those that typically move most month-to-month. Out of necessity we have to compare expectations over two months with September’s M/M figures, even though the BLS won’t be publishing M/M figures. For clarity: where an analyst provided estimates for October and November individually, we have averaged them; where they provided a % total change over 2 months (Nov vs Sep), MNI has divided by 2 for the monthly average. In broad-brush terms, core goods inflation is expected to have firmed since September, helped by used cars, whilst core services inflation should be similar. Note also two expected sizeable contributions, to both upside and downside, from CPI-specific categories that won’t feed through to core PCE and could further distort market reaction. 

• Used cars (+ve): We see an average increase of 0.4% M/M for Oct and Nov across six analysts (range -0.2% to 1.0%) after the -0.4% in September.
• Vehicle insurance* (+ve): We see an average increase of 0.1% M/M for Oct and Nov admittedly across just four analysts (range -0.1% to 0.2%) after a surprisingly weak -0.4% in September.
• Rents (+ve): OER and rent inflation is expected to have modestly accelerated after a surprisingly soft September. We see an average increase of 0.23% M/M for Oct for OER (range 0.12-0.30) in Oct and Nov after 0.13% in September, and 0.21% for rents (range 0.08-0.25) after 0.20% in September.
• Airfares* (large -ve): We see an average increase of 0.1% M/M for Oct and Nov across six analysts (range -0.7 to 1.0) after the 2.7% in September beat already high expectations of 2.0%. 
• Lodging away from home (-ve): We see an average increase of 0.95% M/M for Oct and Nov across six analysts (range 0.2% to 2.0%) after a surprisingly strong 1.35% M/M in September. 
• Apparel (-ve): We see an average increase of 0.5% M/M for Oct and Nov across six analysts (range 0.0% to 1.1%) after a strong 0.7% in September and 0.5% in August. A third consecutive strong month would mark a break from a pattern that has tended to oscillate from month-to-month. 

* denotes a PPI-equivalent feeds into core PCE instead, with any surprises likely to be ultimately downplayed

• Non-core: Food (neutral): Seen with an average increase at a ‘low’ 0.3% M/M in Oct and Nov after 0.25% in September. As always, it’s worth watching food away from home within this after it eased to 0.14% M/M in September for its second lowest since early 2021 (an input that feeds into core PCE but not core CPI).
• Energy (-ve): Seen with a small average increase of around 0.3% M/M in Oct and Nov after a solid 1.5% in September.