US gasoline prices reversed sharply in May, having risen by a little more than 10% mom. Given a very small seasonal adjustment in May, the SA index is expected to show a 9.8% increase, states Societe Generale.
Food prices in the PPI posted the first sequential increase since November and the largest gain since April 2014, hence, a similar outcome in the CPI is expected.
With core CPI expected to post a trend-like 0.2% increase, the aforementioned pressures on the food and energy front are expected to propel the headline CPI index 0.6% higher, adds Societe Generale.
Within the core price index, some moderation from the 0.3% increase posted in April and look for the subindex to rise by 0.17% m/m.
Shelter inflation continues to be supported by the recent increase in household formations and by the related drop in the rental vacancy rate. Public transporation costs likely accelerated on the back on higher energy prices, offsetting the moderation in medical costs after the April surge.
"If the assumptions materialize, the yoy headline inflation will rise from -0.2% to 0% and core inflation will remain at 1.8% in May, and the headline inflation has bottomed and will rise sharply over the remainer of the year. Therefore, headline CPI is projected at 1.7% by December and 2.5% by March 2016, with core inflation at 2.3% and 2.5% for the respective periods", says Societe Generale.
