US: Weaker PPI figures for July – Nomura

Analysts at Nomura note that the US headline PPI was unchanged m-o-m in July, weaker than expected (Consensus: 0.2%) as prices for food (-0.1% m-o-m), energy (-0.5%) and trade services representing changes in margins received by wholesalers and retailers (-0.8%) all declined.

Key Quotes

“Core PPI (excluding food, energy and trade services) continued to rise relatively strongly by 0.3% m-o-m, slightly higher than the market consensus of 0.2%, suggesting a modest acceleration in prices for goods and services provided by domestic businesses.”

“Our forecast for the July CPI is unchanged (0.227% m-o-m for headline CPI and +0.260% m-o-m for core CPI).”

“We think that the contribution from PPI data to core PCE price inflation would likely be small in July.”

“GDP tracking update: Wholesale inventories for July and net revisions to past months were mostly in line with our expectations. In addition, the PPI for intermediate goods that we use to deflate nominal changes in inventories were weaker than we expected in July, implying greater real contribution from changes in inventories in Q3. Thus, we raised our Q3 GDP tracking estimate by 0.1pp to 3.3% q-o-q saar. Our Q2 GDP tracking estimate remains at 4.0%.”