U.S. Aug CPI seen up 0.3 percent, core rate up 0.1 percent

NEW YORK Tue Sep 15, 2009 6:05pm EDT

1 of 2. A woman tries to fit into a car packed with toys after shopping at Toys R Us, in Garden City, New York, November 28, 2008.

Credit: Reuters/Shannon Stapleton

NEW YORK (Reuters) - U.S. consumer prices likely rose in August on a spike in gasoline prices, but the overall inflation picture remains benign as the economy struggles to emerge from recession.

This low-inflation view should be supported by a mild increase in core consumer prices, which exclude volatile energy and food costs, analysts said.

Some expect the government's $3 billion "cash for clunkers" incentive program for autos exerted downward pressure on the core rate, while others thought it would have had the opposite effect.

The government had offered consumers up to $4,500 when they traded in older cars for more fuel-efficient models. The program, which also aimed to boost consumer spending, lapsed in August.

The headline CPI estimates from the 75 economists polled ranged from minus 0.3 percent to plus 0.5 percent.

Their predictions on the August core rate ranged from minus 0.3 percent to plus 0.3 percent.

On a year-over-year basis, the government's Consumer Price Index, its broadest inflation gauge, was likely stuck in negative territory at minus 1.7 percent in August.

The CPI core rate was likely running at 1.4 percent, a tad slower than the 1.5 percent increase in July. This would fall within the Federal Reserve's perceived comfort range of 1.0 percent and 2.0 percent.

The U.S. Labor Department will release the August CPI report at 8:30 a.m. EDT on Wednesday.

Below are some analyst forecasts and comments on the August CPI data:

DAIWA SECURITIES

Headline CPI: +0.4 pct

Core CPI: +0.1 pct

"Food prices are likely to drift lower in August, but a gasoline-led advance in energy prices will probably lead to a noticeable increase in the headline CPI. In the core component, the "cash for clunkers" program could push vehicle prices higher because of stronger demand for new cars and trucks and reduced supply of used ones (trade-ins had to be junked rather than resold). However, discounting in apparel after a high-side reading in the prior month and continued tame increases in the rental components should offset potential pressure from vehicle prices."

J.P. MORGAN SECURITIES

Headline CPI: +0.2 pct

Core CPI: -0.1 pct

"The August reading will further condition views on the severity of disinflationary pressures. In addition, the report on new vehicle prices may help address the riddle of why the "cash for clunkers" program had an unexpectedly small impact on new car and light truck prices in July."

RBS SECURITIES

Headline CPI: +0.4 pct

Core CPI: 0.0 pct

"In August, gasoline prices resumed their climb. Seasonally adjusted gasoline prices may have surged by almost 10 percent, driving energy costs higher by nearly 5 percent. As a result, the headline CPI could have increased by 0.4 percent."

"RBS believes that the new motor vehicle component of the CPI will be down sharply, perhaps by over 2 percent, in August, which would subtract over a full tenth of a percentage point from the core reading. Thus, RBS looks for a flat core reading and would not be entirely surprised to see a marginal month-to-month fall."

(Polling by Bangalore Polling Unit, Reporting by Richard Leong, Editing by Chizu Nomiyama)

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