TD Securities economists anticipate that the United States July Core Consumer Price Index (CPI) will return to its trend following a one-off weakness observed in June, forecasting a 0.20% month-over-month (m/m) increase and a 2.4% year-over-year (y/y) rise for Core CPI. Headline CPI is projected at 0.15% m/m and 3.4% y/y, with the economists noting upside risks if categories that were soft in June rebound more strongly than expected [1].
The services segment is expected to be the main driver of the upside in July, while core goods prices are likely to contribute to inflation for the first time in three months. TD Securities forecasts that rents and Owners’ Equivalent Rent (OER) will rebound slightly, with expected m/m increases of 0.26% and 0.27%, respectively, after moderating more than anticipated in June [1].
Headline CPI is expected to rise 0.15% m/m in July, despite continued downward pressure from the energy component, particularly gasoline prices, which are forecast to decline by 2.9% m/m. In contrast, food inflation is likely to gain momentum due to another increase in grocery prices [1].
Looking ahead, TD Securities expects the core segment to continue evolving positively through September after peaking at 2.9% y/y in May. Similarly, headline inflation, which likely peaked at 4.2% in May, is expected to resume momentum in the fourth quarter, although its trajectory will depend on the resolution of the Middle East conflict [1].
CONCLUSION
TD Securities projects a rebound in US core CPI for July, with both core and headline inflation expected to regain momentum after June's softness. The outlook remains cautiously optimistic, with upside risks if certain categories recover more robustly, and future inflation trends will depend on external factors such as the Middle East conflict.