NH Investment & Securities "Headline Inflation Expected to Slow Down Until June"

"Core inflation likely to slow down gradually"

[Image source=Reuters Yonhap News]

NH Investment & Securities forecasted on the 14th that the US headline inflation will significantly slow down again in June. However, they expect core inflation to decelerate more slowly.

Jeong Yeogyeong, a researcher at NH Investment & Securities, stated, "US headline inflation is likely to enter the 3% range in June. However, due to rising prices of goods including rent and used cars, core inflation is expected to slow down gradually."

The US Consumer Price Index (CPI) for May rose 4.0% year-on-year and 0.1% month-on-month, meeting expectations. This marked the lowest inflation rate in 2 years and 2 months since March 2021 (+2.7%).

The core CPI, which excludes energy and food, increased by 5.3% year-on-year and 0.4% month-on-month, also in line with expectations. Since March 2023, core inflation has exceeded headline inflation, and core inflation recorded a 0.4% month-on-month increase for six consecutive months.

Researcher Jeong explained, "The biggest contributor to the slowdown in headline inflation was energy (down 11.7% year-on-year, down 3.6% month-on-month). Airfares, furniture and household goods, and health insurance each declined by 0.02 percentage points, impacting the overall figure."

On the other hand, used car prices rebounded for the second consecutive month, rising 4.4% month-on-month, contributing +0.12 percentage points. Additionally, prices of auto insurance (+0.05 percentage points), dining out (+0.02 percentage points), clothing (+0.01 percentage points), and pharmaceuticals (+0.01 percentage points) increased, supporting core inflation.

Rent, which accounts for 34.2% weight in the CPI, rose 8.1% year-on-year and has slowed for two months after peaking at +8.3% in March. However, the inflation contribution from rent slightly expanded.

Researcher Jeong concluded, "Therefore, due to base effects, inflation rates in the US will slow down through the first half of the year, but in the second half, goods prices may rebound again, similar to Canada and Australia."

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