US inflation probably moved sideways at best in October, highlighting the uneven path of easing price pressures in the home stretch toward the Federal Reserve’s (Fed) target.
The core consumer price index (CPI) due on Wednesday, which excludes food and energy, likely rose at the same pace on both a monthly and annual basis compared to September’s readings.
The overall CPI probably increased 0.2% for a fourth month, while the year-over-year measure is projected to have accelerated for the first time since March.“The October CPI report will likely support the notion that the last mile of inflation’s journey back to target will be the hardest,” Wells Fargo & Co economists Sarah House and Aubrey Woessner wrote in a report.
“Excluding the more volatile energy and food components, the unwinding of pandemic-era price distortions has proven to be frustratingly slow.”
They added that prices of core goods probably rose again in October, due in part to higher demand for cars and auto parts after Hurricanes Helene and Milton. Evacuation orders from the storms also forced more people to stay in hotels, continuing what’s been a “glacial slowing” in services prices.
Both the CPI and Producer Price Index are expected to come in hot, pushing long-end rates even higher – and further restraining the economy over the next couple months. Control-group retail sales will likely slow and the unemployment rate is expected to continue climbing, reaching 4.5% by year-end, according to economists Anna Wong, Stuart Paul, Eliza Winger, Estelle Ou and Chris G. Collins.
Even so, the story is very consistent, with inflation continuing to come down on a bumpy path, and one or two bad reports won’t change that pattern, Fed chair Jerome Powell said last Thursday after the central bank cut interest rates by a quarter point.
Wholesale inflation figures
The US government will also release wholesale inflation figures in this week, which probably picked up after stalling in September. Meantime, earnings growth that continues to outpace inflation likely contributed to another decent gain in retail sales, in data due Friday.
Tomorrow, Fed governor Christopher Waller is due to speak at a banking conference before the central bank releases its latest Senior Loan Officer Opinion Survey. Powell is scheduled for an event later in the week, while New York Fed president John Williams and Dallas Fed president Lorie Logan are also on the calendar.
In Canada, meanwhile, home sales data for October will reveal whether the central bank’s rate cuts are starting to jolt the sluggish housing market.
A packed week for data elsewhere includes a range of economic numbers from China, wage and growth statistics in the United Kingdom, and multiple inflation readings, from India to Argentina. New European Union forecasts will also be published.
China economy
A data blast from China may show the economy’s performance improved marginally in October, with industrial output, fixed asset investment and retail sales all seen picking up a bit as the downturn in property investment moderates.
Even so, the data will underscore the necessity of the broad stimulus steps undertaken since late September as President Xi Jinping seeks to achieve his growth goals. China’s slew of figures comes at the end of the week, on the same day that Japan is expected to report that its economic growth slowed to an annualised 0.6% quarter on quarter in the three months through September. India’s inflation is projected to have picked up to 5.72% in October, while industrial output is seen rebounding in September in figures due on Tuesday.
Australia gets consumer and business confidence surveys tomorrow before releasing a number of labour-market statistics later in the week.
The wage price index for the third quarter comes on Wednesday, and other employment statistics for October will be published a day later. Indonesia reports trade data on Friday. — Bloomberg
Molly Smith and Craig Stirling write for Bloomberg. The views expressed here are the writers’ own.
