PCE deflator: inline with expectations - Nomura

Key Quotes:

"Headline PCE inflation was flat m-o-m in June, in line with expectations (Nomura and Consensus: 0.0%). Excluding energy and food, the core PCE price index rose by 0.112% m-o-m, matching expectations (Nomura: 0.098%, Consensus: 0.1%). 

As a part of annual revisions, financial service prices since mid-2015 were revised up, raising the y-o-y inflation for both headline and core PCE price indices. As a result, the yo-y core PCE inflation now stands at 1.5% in June in line with our expectations (Nomura: 1.5%, Consensus: 1.5%). The price index for financial services is often revised significantly with annual revisions due to an incorporation of newly available data on productivity of the banking industry. 

However these revisions have little impact on the future path of core inflation and therefore have not led us to materially change our medium-term inflation outlook. Moreover, the broader trend of core PCE inflation, which slowed significantly in recent months, has not changed. 

We are expecting y-o-y core PCE inflation to tick down further to a 1.3-1.4% range in coming months and revert back gradually thereafter. The revised monthly profile of the core PCE price index suggests that residual seasonality in the metric has changed slightly. 

Residual seasonality, which tends to push up core PCE inflation in Q1 but lower in Q4, seems to have become less pronounced because of new seasonal adjustment factors introduced by the BEA."