US Inflation Monitor_ CPI Preview_ Core down, headline up

Summary of Key Points from the Conference Call Industry Overview - The document focuses on the US Inflation Monitor and provides insights into the Consumer Price Index (CPI) for December 2024, highlighting trends in core and headline inflation. Core Points and Arguments 1. Core CPI Expectations: Core CPI is expected to rise by 0.26% month-over-month (m/m) in December, translating to a 3.3% year-over-year (y/y) increase, which is 5 basis points (bp) lower than November's figure [6][17][36]. 2. Headline CPI Increase: The headline CPI is projected to increase by 0.37% m/m and 2.9% y/y, driven by seasonally adjusted energy inflation [6][17][36]. 3. Core Goods Inflation: Core goods inflation is decelerating but remains positive, with an expected increase of 0.11% in December, down from previous months [9][12]. 4. Rents and Housing: Rents are expected to accelerate, with both primary residence rents and Owners' Equivalent Rent (OER) projected to rise, although they will remain below the underlying trend for the year [7][12]. 5. Core Services: Core services inflation, excluding housing, is anticipated to decrease, particularly in categories like hotels and airfares, which are expected to show a deceleration [7][16]. 6. Energy Prices: Seasonally adjusted retail gasoline prices are expected to increase, contributing to the overall rise in headline inflation despite a nominal drop in observed gasoline prices [31][32]. 7. Car Prices: The relationship between used and new car prices is highlighted, with expectations of deceleration in both categories due to fading hurricane effects [19][20]. Additional Important Insights 1. Seasonal Factors: Seasonal adjustments may lead to downward bias in December's inflation readings, particularly in housing-related metrics [24][25]. 2. PCE Implications: The forecast for core Personal Consumption Expenditures (PCE) inflation is set at 0.21% m/m, indicating a stronger performance compared to the previous month [36][37]. 3. Long-term Inflation Trends: The annualized 3-month pace for core PCE is expected to remain stable at 2.4%, with projections indicating a gradual decrease in inflation rates over the next few years [38][39]. 4. Market Volatility: The document notes ongoing volatility in shelter costs, with expectations of short-term acceleration in rents despite a longer-term downward trend [12][24]. This summary encapsulates the key insights and projections regarding inflation trends in the US economy as discussed in the conference call, providing a comprehensive overview for stakeholders and investors.