Producer prices due from the US on Thursday 11 January 2018 at 1330 GMT

The headline is expected at +0.2% m/m

  • prior +0.4%

Preview via Nomura:

Topline producer prices rose 0.4% m-o-m in November, driven by a strong increase in energy prices.

  • Excluding volatile food, energy and trade (wholesalers' margin), producer prices were up 0.4%.

Pipeline pressure on consumer prices appears to be modest.

  • The inflation of PPI for intermediate goods has been accelerating, in line with steady upward pressure on input prices. However, the prices of finished goods and consumer goods have not responded strongly.

Elsewhere, service prices which make up a large share of the PPI rose modestly by 0.2%.

  • We expect service prices to continue rising at a steady pace.

As spikes in energy prices caused by the hurricanes revert, aggregate PPI inflation will likely return to its previous trend in December. Excluding food, energy and trade components, we expect modest PPI inflation. Note that our December CPI forecasts may be subject to revisions based on the December import prices and PPI data.

Speaking of CPI, that is due from the US 24 hours later, on Friday 12 January 2018 0130 GMT. Preview again via Nomura (note their caveat, above):

We expect core CPI in December to increase 0.2% m-o-m, a slight acceleration from November's 0.1%, but maintaining the y-o-y rate at 1.7%.

Among core service components, we think rent and homeowners equivalent rent continued to slow in December.

  • Rent will likely remain a drag to our core inflation outlook over the medium term.
  • Rental vacancy rates are rising, reflecting an oversupply of newly built apartment units relative to demand.
  • Considering a high number of apartment units still under construction, the supply-demand imbalance will likely continue at least for the near term.

Elsewhere, we expect a modest rebound in medical care service prices, which fell for the first time since May 2017, driven by a sizable 0.8% drop in physicians' services.

  • However, uncertainty remains high considering the decreasing response rate of the survey sample for the estimation of medical care prices. This development may have exacerbated volatility in the medical care price index.

Among core goods, reflecting higher demand for used cars following major hurricanes, used car prices likely showed another solid increase in December. However, looking ahead, rising supply from rental car companies and off-lease vehicles could add more downward pressure on new and used vehicle prices. In addition, we think apparel prices rebounded December after a sharp decline in November which, was likely amplified by a seasonal adjustment process.