U.S. headline inflation likely accelerated in September, core inflation to have remained stable

The headline CPI inflation of the U.S. is likely to have accelerated in September. According to a Societe Generale research note, the CPI is expected to have increased 0.4 percent sequentially, which might stimulate the annual rate to 1.5 percent, the most rapid pace of growth since October 2014.

A 5 percent seasonally adjusted rise in gasoline prices is anticipated to have stimulated the headline print. This alone possibly contributed around 0.16 percentage points to the monthly rise. In all, the energy index might have increased 2.5 percent seasonally adjusted. In the meantime, prices of food are expected to have barely changed.

In the previous month, the core CPI accelerated 0.3 percent, thanks to a 1 percent sharp rise in the medical care cost. The rise in the component was mainly because of another increase in pharmaceutical goods surpassing 1 percent; however, the bulk of the advance was because cost of hospital services climbed 1.7 percent.

The details of the rise implied that a considerable portion of it was mainly in the South region. Such a gain is unlikely to be repeated in September. Admittedly, the medical care index is anticipated to have eased to a 0.2 percent advance last month, stated Societe Generale. Prior to the sharp increase in August, the medical care index averaged 0.45 percent monthly increase in 2016, the most rapid since 2007.

Elsewhere, prices of apparel might have declined 0.1 percent, whereas prices of used car dropped 0.2 percent. Also, airfares declined 0.4 percent. On the contrary, rates of hotel are expected to have increased 0.4 percent. New vehicle sales are likely to have risen 0.1 percent; however, there are certain downside risks here. After the September auto sales showed that buyers were lured by near-record incentives to buy new cars.

“Overall, we expect that the core rate increased by 0.18 percent in September, which would leave the annual rate steady at 2.3 percent. Finally, the NSA index may have printed 241.557”, added Societe Generale.