SPAIN AUCTION PREVIEW: On offer next week

Three analyst views for the main PPI metrics ranging from above, close to, and below consensus for August. 

• NatWest: PPI seen rising 0.5% M/M in August after 0.9% M/M in July.
• “Food and energy costs are expected to have firmed again in August, while trade services (which measure changes in retailer and wholesaler margins) could have increased more modestly (after a 2.0% jump in July).” 

• “Excluding the volatile categories of food, energy and trade services we expect the core PPI increased by 0.3%, following a 0.6% spike in July. Strength in transportation and financial services costs accounted for almost 50% of the 0.6% gain in core prices in July. We expect a more modest but still positive contribution from those two measures in August”

   

• JPM: PPI final demand seen at 0.2% M/M in August, “notably cooler than the surprise” 0.9% M/M in July. It reflects “in part notably weaker contributions from food and energy”, with PPI energy -0.8% M/M after 0.9% M/M in both June and July and flat PPI food prices after two stronger gains.
• It would see Y/Y PPI inflation ease modestly to 3.2% Y/Y after jumping from 2.4% to 3.3% Y/Y in July.
• PPI ex food & energy seen rising 0.3% M/M and 3.5% Y/Y, the latter down from 3.7% Y/Y in July.
• PPI core goods seen at 0.4% M/M for a second month, “continuing on the recent gradual acceleration in core goods PPI prices that likely has a growing contribution from tariffs”. It could see additional upside pressure as “additional tariffs come into place and firms move toward passing on a larger share of those cost pressures”.
• “Core services prices shot up strongly in the July report on a big increase in trade services […]; this category is both volatile and prone to revisions, so we do not forecast a similar dynamic for August. That said, there certainly is some risk that another such contribution could be recorded.” 

• UBS: PPI final demand seen flat in August. PPI food seen at -0.7% M/M “while energy costs should play a marginal role in the headline measure this time.”
• “Core goods are likely to see a moderate increase of 0.3%. Trade services, having surged 2.0% in July—the sharpest monthly rise since March 2022—are forecasted to retreat.”
• “This component, which reflects margins for wholesalers and retailers, remains volatile, especially as recent tariff changes could force businesses to absorb added costs into margins.”
• PPI ex food & energy seen rising “just” 0.1% M/M for a “notable deceleration”.
• “Core PPI, which strips out food, energy, and trade services, is forecasted to grow by a steady 0.2% M/M”.

• PPI inflation for August is released today at 0830ET, in only the second month of the year where it comes ahead of CPI.
• It’s going to be watched particularly closely after last month’s surprising surge to a forty-month high for monthly inflation across all three major categories. Consensus looks for some moderation to a still solid 0.3% M/M whilst the data are also revision-prone which could take some of the sting out of July’s rise.
• Headline PPI inflation is seen at 0.3% M/M in Aug after 0.94% M/M.
• One core PPI measure (ex food & energy) is also seen at 0.3% M/M after 0.92%.   
• Our preferred measure of core PPI (ex food, energy & trade services) is seen at 0.3% M/M after 0.61% M/M. For recent context, this follows an average 0.3% M/M through Q1 before a soft patch with an average 0.0% M/M in Q2 prior to that July surge.
• We prefer this narrower measure of core because it excludes the volatile trade services category. The latter captures imputed changes in retailer and wholesaler margins and jumped 2.0% M/M in Jul after -0.3% in Jun, 1.5% in May and -0.3% in Apr. One particularly strong area here was margins for machinery & equipment wholesaling at 3.8% M/M.
• We wouldn't be surprised by large revisions in these very volatile categories. April's PPI report for example showed the biggest decline in final demand services in index history (to 2009), at -0.7%, due in large part to a 1.6% drop in final demand trade services within which was a 6.1% plunge in "machinery and vehicle wholesaling" prices. But by the next month's report these were revised respectively to -0.4%/-0.5%/-0.9% (with revs to prior months as well).
• All of these core PPI figures capture other noisy imputed services such as “portfolio management & investment advice”, although we still touch directly on the latter when it comes to core PCE implications (more on this to follow).
• Note that differing levels of Bloomberg survey responses, with headline consensus based off 52 estimates and ex food & energy based off 44 but ex food, energy & trade from just 6 estimates.
• When it comes to the narrower core PPI expectations, five analysts look for 0.3% M/M (including Citi, GS and Wrightson ICAP) and one for 0.2% M/M (UBS). That’s not a uniform view more broadly, however, with RBC for instance eyeing “another hefty” 0.62% M/M. 

• SNB Chair Schlegel has announced in a speech today that the SNB will start publishing meeting summaries from the 25 September meeting. We see no signal for SNB near-term monetary policy from the announcement:
• "Starting with the next quarterly assessment, we will publish a summary of our monetary policy discussions. The summary will be published four weeks after the monetary policy decision. It will cover the two days of the monetary policy assessment and provide our view of the economic and monetary situation. The new summary will present the main points from the Governing Board’s discussions. It aims to promote a better understanding of how we apply our monetary strategy to the situation at hand", SNB Chairman Schlegel says today at his speech before the Ticino Bankers’ Association in Vezia.
• "The summary will not include details of individual positions. Rather it will present the deliberations and decision of the Governing Board collectively", Schlegel adds.