CPI and retail sales in focus – RBC CM
After a week dominated by central bank events, attention turns back to economic data today with two key US releases: June CPI and retail sales which are likely to garner maximum investors attention, explains Adam Cole, Analysts at RBC Capital Markets.
“Our economists note that the recent slowing in CPI inflation has been a function of transitory factors (energy, doctors’ fees, cellphone plans and rents) and that some stabilisation should be in store. They forecast monthly increases of 0.2% and 0.3% (headline/core), slightly above consensus in both cases. If those expectations materialise, headline inflation will only slow to 1.8% (from 1.9%) and the core run-rate will actually rise to 1.9% (from 1.7%). Importantly, as it relates to the broader conversation, with Yellen pushing the idea of the Philips curve, this means the risk of firmer inflation is present and that is enough to keep this Fed fully engaged in the hiking cycle.”
“Our view remains that the markets over-interpreted Yellen’s comments earlier this week and are underpriced for higher rates. June retail sales are expected to partially reverse May weakness. The expected 0.2% m/m increase in core sales would leave sales in Q2 as a whole up a solid 0.5% q/q (non-annualised). June industrial production and July UoM confidence are also due today.”
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