Our AI-Generated CPI Forecasts: Jul 2023

Inflation numbers, as measured by the Consumer Price Index (CPI), will be released tomorrow before market open. Stock market will be watching these figures very closely.

OdinUltra, our financial AI infrastructure, predicts headline inflation to be 3.39% YoY (+/-0.05%) for July 2023, an increase fueled by energy and transportation services. Our algorithms forecast core inflation to be 4.7% YoY (+/-0.12%) for July 2023, a modest decline as shelter held steady and transportation commodities growth slowed, contributing to a deceleration of CPI.

Leveraging our high-frequency data, we model individual components of CPI in addition to the overall headline and core index. Our machines predict the energy component to worsen to -10.63% YoY, contributing to the rise in headline inflation. Our models forecast the food component to improve to 5.01% YoY.

Our algorithms project the shelter component to hold steady at 7.91% YoY. Although year-over-year rents have moderated, average daily rates (ADR) for hotels have not. Note that ADR contributes to the shelter portion, under lodging away from home. Our machines forecast the medical care services component to improve to -1.18% YoY.

 
Our models predict the transportation services component to worsen to 9.07% YoY. It includes airline fares, which placed upward pressure as consumers traveled extensively over the summer. Our algorithms predict transportation commodities to continue to improve to -1.52% YoY. Used car prices lost steam amidst better new car inventory. New car prices have also cooled gains amidst higher interest rates.

Equity markets went up ten out of the past twelve CPI releases. Average absolute moves for the S&P 500 and NASDAQ 100 were 0.80% and 1.26%, respectively.