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2017年11月19日 星期天

机构研报

Global Macro Weekly Digest (Issue 95):Will the US inflation pick up?The August CPI data will provide the first update

报告日期:2017-09-11

This week, the US Bureau of Labor Statistics (BLS) will release August CPI inflation data on Thursday (September 14th) which will provide the first look at the inflation development in August. As the Fed’s preferred inflation measure, the PCE inflation, will not be updated until September 29th, the August CPI data could provide important information on inflation during the last month for the Fed’s September meeting on September 20th - 21st. In our view, the recent recovery of energy prices as well as the weakness of the dollar could both provide the lift to the headline CPI inflation; but the underlying price pressure is expected to remain subdued, with core CPI remaining at around 1.7% YoY.

Fueled by Trump’s stimulus fiscal plan and the recovery of crude oil prices, the US’s inflation reached its highest level in February, with the headline CPI at 2.7% YoY, core CPI at 2.2% YoY, headline PCE at 2.2% YoY and the Fed’s preferred measure, core PCE, at 1.9% YoY. Afterwards, all inflation measures turned to continuous drops, falling back to 1.4% YoY for PCE measures, and 1.7% YoY for CPI measures in July. However, the recent recovery of energy prices should help lift the headline inflation. Also, the recent depreciation of the dollar has led to a mild increase in inflation expectations. Thus, we expect the August CPI to pick up in its headline measure, but the core CPI could stay around the July’s reading.

Specifically, as we have addressed in previous reports, the price fall of telecommunication services, transportation, and medical care explains the recent inflation slumber in the US. 1) the recent price war in the telecom industry has accumulatively dragged down the telecommunication services price by more than -10% this year, which caused around 0.15 ppt fall in headline CPI; 2) the decelerated price growth of medical care (falling from 4% YoY in January to 2.6% YoY in July) and transportation (falling from 5% YoY in January to 1.2% YoY in July) also caused around 0.3 ppts fall of headline CPI. Specifically, the medical care and transportation prices surged during last year and the recent drop is just returning to their 10-year average level of price growths.

Looking forward, as the price war in the telecom industry has come to an end and the price growths of medical care and transportation dropped back to 10-year average, these factors’ drag on CPI should gradually fade, and inflation should stabilize in the near future. By saying "stabilize", we expect no further falls, but also no significant increases, as the subdued wage growth and the depressed pricing power of companies will form notable headwinds on inflation development. Other possible boosts on inflation include: 1) strong consumption growth, 2) Trump’s tax reform in 4Q, and 3) the weak dollar effect. But such possible upside on inflation could be limited. Consumption growth could be dampened by the hurricanes, the tax reform is still in its very preliminary stage, and dollar's downside is also limited.

Finally, for the Fed, as we have continuously reiterated, inflation has become the more important indicator for policy decisions in the future, as the US job market is already near or at full employment. The minutes of Fed’s July meeting clearly stated the lack of inflation that companied the continued economic recovery has become a concern, at least for some members, and has caused a fissure on the timing of future rate hikes. Thus, we expect the Fed to act less aggressively regarding the possible rate hike in December, as it needs more time to understand how these conflicting forces are unfolding.

In sum, although the August headline CPI could be lifted by the rising energy prices, we maintain our view that the US inflationary pressure will remain subdued in 4Q. However, we do not expect such outlook to significantly derail the Fed’s policy trajectory, i.e., unless there are significant falls in inflation (which we do not expect to see), the start of the Fed’s balance sheet normalization in September is still well on track; and the possibility of December rate hike remains.

研究员:招商证券(香港)研究所 所属机构:招商证券(香港)