Looming inflation report could hold an unpleasant surprise for markets
Wall Street's newfound faith in a soft landing faces a big test later this week with an economic report that could paint a deceptively benign inflation picture. The consumer price index, a widely followed gauge of goods and services costs across the U.S. economy, is expected to show a 0.2% increase in July, according to the Dow Jones consensus estimate. That would translate into a 12-month headline increase of 3.3%.
"Tailwinds may turn into headwinds as consumer savings run down, fiscal spending decelerates and global liquidity shifts," Shalett wrote. To be sure, some of the signs of decelerating inflation pressures have a foundation. Primarily, high-frequency indicators are pointing to declines for rents and used vehicles, two key ingredients in the inflation surge that began in 2021. "Rent could be an important source of a positive surprise in July's CPI," Yardeni wrote.
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