US CPI due out at 8:30 AM
The US CPI for the month of June is due at 8:30 AM. The expectation is for a gain of 0.6% vs a 0.1% gain last month. The ex food and energy component is expected to rise by a smaller 0.1%. Despite the higher reading the YoY is expected to fall by -1.5% from -1.3% last month.
The gains from the sharp commodity gains extended to July last year when CPI rose by +0.7%. After July, the inflation rate is likely to continue to move back higher as the next 5 months showed monthly inflation readings of 0.0%, 0.0%, -0.8%, -1.7% and -0.8%. When this starts to kick in the inflation readings for the YoY will start to rise.
From an ex food and energy component the inflation rate has been steadily moving lower. The high reached was 2.5% in September of 2008. Since then the rate has fallen to a low of 1.7% in January. Last month the YoY came in at 1.8% ex food and energy. The higher PPI yesterday may flow through to the CPI at some point. However, with demand likely to remain fairly contained, the pricing power is likely not to lead to a resurgence of inflation.
Also out at 8:30 will be the Empire Manufacturing Index for the month of July. This index is designed to measure the manufacturing activity in the NY area. The expectation is for a decline of -5.0. This is better than the -9.41 reading last month but the 15th straight month with the index below zero indicating contraction. A lower dollar may be helping the manufacturing sector in the US as a lower dollar makes exports more competitive abroad.
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