Market Mover - BNP PARIBAS - Investment Services India

Key Data Preview
Chart 21: US Total vs. Core CPI Inflation
Source: Reuters EcoWin Pro
% m/m Jan (f) Dec Nov Oct
CPI 0.3 0.1 0.4 0.3
Core 0.2 0.1 0.0 0.2
NSA (index) 217.05 215.95 216.33 216.18
Key Point:
CPI should increase by 0.3% in December, driven by
higher energy prices.
BNP Paribas Forecast: Moderate Increase
US: Consumer Price Index (January)
Release Date: Friday 19 February
Headline CPI is expected to increase 0.3% m/m in
January. The forecast for January is complicated by the
fact that the BLS will revise its seasonal adjustment factors
as well as the weights of the CPI basket. Weights depend
on relative prices and gasoline prices have increased since
last year. Therefore, the weight for CPI energy will likely be
revised higher in 2010, suggesting gasoline price swings
will have a large impact on headline CPI this year. In
January, we forecast that energy prices increased by 2.4%
m/m, driven by a 4.3% expected rise in gasoline prices.
Food prices are expected to increase by 0.2% m/m,
reflecting upward pressures on supermarket prices. The
CPI food-at-home component rose by 0.3% m/m in
December and is expected to post a similar gain in
January, as pressures in food commodity prices have
intensified recently. Excluding food and energy, core CPI
should increase by 0.2% m/m. While underlying price
pressures remain contained, metal prices have been
trending higher in recent months. Upward pressures have
already surfaced in import and producer prices and have
the potential to filter through to CPI prices. Auto prices
would likely be the first CPI component to be affected by
this upside risk. Despite this, sluggish shelter prices and
plummeting unit labour costs suggest underlying price
pressures should remain contained. In non-seasonally
adjusted terms, headline CPI should increase to 217.05 in
January from 215.95 previously.
Market Economics 12 February 2010
Market Mover
56
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