US December 2021 inflation data due on Wednesday 12 January 2022 – preview

snapshot from the ForexLive economic data calendar,

it here


times in the left-most column are GMT.

numbers in the right-most column are the ‘prior’ (previous month)

number in the column next to that, where is a number, is what is the
consensus median expected.

Wow .. the headline is expected at 7% y/y.

There are a lot of ‘buts’ surrounding this data release, this in summary from Scotia is a decent guide to all the ‘howevers’ you can expect after the data, its going to be messy!

  • The general pattern to date has been such that when COVID-19 cases are rising, inflation tends to ebb, and vice versa as shown in chart 3. Since cases are exploding now, this rough relationship could give rise to significant nearer-term downside pressure on inflation while pushing forward a renewed surge when cases eventually subside. A challenge to this relationship, however, is that the supply side is tighter and the US economy has closed spare capacity.
  • In terms of drivers for the December reading, one source of uncertainty is that there will be two forms of methodological updates in this release and the next one. CPI spending weights will be updated and based on consumer expenditure data from 2019–2020 instead of 2017–18. This is likely to dampen contributions from high-contact services and raise relative contributions from categories like housing and several categories of goods. … , the BLS is using spending patterns from both 2019 and 2020 and hence is mixing pre-pandemic and a part of pandemic-era patterns.
  • Gasoline prices fell in seasonally unadjusted terms, but seasonal adjustments are likely to result in a mild positive contribution to the overall month-over-month change in CPI.
  • Natural gas prices fell sharply from late November through December and even at a modest weight on utility gas service of 0.82% this should be a significant drag effect on headline CPI of around -0.1 –0.2% m/m
  • New vehicle prices were up by about 3–4% which at a 3.9% weight should add 0.1–0.2% to overall CPI as another rise in used vehicle prices should add up to 0.1% to CPI.
  • Watch for greater housing contributions through owners’ equivalent rent.
  • As usual, the dominant swing factor is focused upon estimating idiosyncratic and pandemicrelated effects

Accounting for all that lot in post-data trading should lead to outsize volatility. Take extra care around this data release as the

  • ‘higher CPI –> more and faster rate hikes –> buy USD’

scenario may well blow up should any or all of those factors outlined above become the focus. Add in the market consensus of 3 to 4 Fed rates hikes to come this year too.

fed chair powell

What he said.

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