Sep 2024 CPI Estimate
Tomorrow at 8:30 am ET we will get the long-awaited Sep CPI. Fed’s focus in some prior months hasn’t been that much on inflation, as much as it was on employment. However, after the latest jobs report, things might have shifted a bit and inflation is now back in primary focus. Sep CPI is the last one coming out before the Fed meets in Nov meaning it will be an extremely important piece of the puzzle in determining whether they cut in Nov and by how much.
So far in 2024, CPI figures have been all over the place. First, we had high headline CPI in Q1 (+0.38% MoM on average) coming after much tamer Q4 2023 (+0.16% MoM on average). Then we got extremely cool prints in Q2 (only +0.09% MoM on average) and cool prints also continued in Q3 so far (+0.17% MoM on average to date). Unlike Q1 which was higher than desired, headline CPI prints in Q2 and Q3 so far have been mostly consistent with the Fed’s inflation target, and they mostly came in better than expected (0.1 pp better on average).
Core CPI for the most part of 2024 acted similar to headline. Q1 was unusually high (+0.37% MoM on average) coming after tamer Q4 2023 (+0.27% MoM on average). Then Q2 was notably cooler (+0.17% MoM on average), but Q3 so far has been a tad higher than desired (+0.22% MoM on average to date). Core CPI in Q2 and Q3 came in mostly better than expected (0.1 pp better on average), but Aug (0.1 pp higher than expected) was the first miss since Mar.
Now we have a somewhat unusual situation where headline was tame in Aug and came in line with expectations, but core CPI was a bit hotter and came a 0.1 pp above expectations. The last time we had something similar was in Dec 2022 when headline was a bit cooler than expected, but core was hotter than expected.
My average error for estimating headline CPI (based on last 19 CPI estimates from Feb 2023 - Aug 2024) remained at almost perfect -1 bps (-0.01 pp).
My average error for estimating core CPI (based on last 19 core CPI estimates from Feb 2023 - Aug 2024) is low -3 bps (-0.03 pp).
For public links to my prior month CPI estimates go to ArkominaResearch.com.
The market is currently expecting a 25-bps cut in Nov. A hotter CPI print might make some Fed officials question whether they should cut at all, while a cooler CPI might get them to rethink whether they should make another 50-bps cut.
In the last couple of weeks inflation fears have gone up with questions of whether port strikes, escalating geopolitical tensions in the Middle East and natural disasters (like hurricanes Helene and Milton) might add some new inflationary pressures. Can we see some of these pressures in Sep CPI already?
Will headline and core CPI continue to diverge in Sep?
These are all important questions that might in the end determine what the Fed does in Nov.
My Sep CPI estimates are…
Headline CPI
+0.1% MoM (barely, same as consensus and +4 bps higher than the Cleveland Fed)
+2.3% YoY (same as consensus and +6 bps higher than the Cleveland Fed)
Core CPI
+0.3% MoM (+0.1 pp higher than consensus and +5 bps higher than the Cleveland Fed)
+3.2% YoY (same as consensus and +9 bps higher than the Cleveland Fed)
My unrounded estimates:
If Sep CPI comes as I expect, this will be the 2nd month where we see a bigger divergence between headline and core. I suspect that some Fed officials might not be too happy to see a back-to-back +0.3% MoM and 2nd month of no progress for core CPI, but headline CPI continuing to make progress would be a welcome development. This means that 25 bps might be still in play for Nov after this print, but inflation anxiety might be higher in the market (particularly due to core). What the Fed ends up doing in Nov will, however, get determined by Oct Employment Report that will come out just several days before the Fed meeting.
If you’re interested in learning my longer-term CPI estimates (until mid-2025), consider subscribing to Marko’s CPI Report which goes out each month before CPI and, among other things, contains analyses of:
Forward looking inflation indicators
Detailed Sep CPI estimate
Headline and core CPI trajectory until the end of Q2 2025
To get Marko’s CPI Report, make sure to subscribe to Arkomina Research Pro Investor at this link: ArkominaResearch.com/Subscriptions/
By subscribing to Pro Investor you also get:
Marko’s Fed report that goes out before each Fed meeting and, among other things, contains a detailed analysis of the economy and what type of landing we are in, an analysis of monetary policy lags, what will the Fed likely do in 2024 and 2025, headline and core PCE inflation trajectory and unemployment rate trajectory
Marko’s Brain Daily that goes out each trading day containing analyses of all relevant macro indicators and events (such as Fed speeches and Fed meetings) prior day, my estimates for all important macro indicators coming out that day and how the market may react to each scenario, as well as my view of the equity and bond market short-term direction, earnings analyses and much more
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Your CPI report is what I wait for each month. Thank you for all the great work you do