Markets Bracing for PPI, CPI Reports This Week

Summary

Bloomberg's Michael McKee previews the upcoming PPI and CPI reports and their implications for the Federal Reserve. He cautions that headline inflation moves could be misleading and that PCE-relevant nonmarket services details matter more. He also highlights uncertainty from upcoming BEA calculation changes and elevated CPI breadth.

• PPI is due Thursday and CPI is due Friday in a shortened trading week.
• Headline PPI is expected to rise significantly, while CPI headline jumps month-over-month but base effects leave year-over-year unchanged.
• Core CPI is expected to decline by one-tenth on the month, but McKee says the details matter more.
• Fed Governor Chris Waller highlighted imputed nonmarket services prices as a large share of core PCE increases.
• BEA changes to portfolio management and legal services calculations may add uncertainty to PCE estimates.
• CPI diffusion shows more than half of CPI components rising at 2-to-4 percent in July, signaling limited inflation progress.