Goldman Sachs expects US core CPI to rise 0.19% month-on-month in July, slightly below consensus

Overview

The report provides a component-level forecast for US CPI in July 2026. Goldman Sachs expects core CPI to rise 0.19% month-on-month and 2.47% year-on-year, and headline CPI to rise 0.05% month-on-month and 3.35% year-on-year, all slightly below consensus. Lower energy prices and slowing housing inflation are the main restraining factors, while airfares, used cars, and some consumer electronics prices create localized upward pressure.

Core views

The core judgments include three points: first, auto inflation is clearly divergent internally, with used and new car prices rising but auto insurance prices declining; second, the underlying trend in the housing component continues to slow, with moderate readings for owners' equivalent rent and primary residence rent; third, travel services prices are mixed, with the rebound in jet fuel pushing airfares higher, while the fading boost to lodging demand related to the World Cup keeps hotel prices falling. Looking ahead over the coming months, a smaller contribution from tariff-related price increases, cooling housing inflation, and a reversal of airfare pressure are expected to keep core CPI month-on-month growth around 0.2%.

Analysis framework

The report uses a bottom-up CPI component forecasting approach, combining official component weights with alternative data such as used car auction prices, dealer incentives, online insurance premiums, jet fuel prices, and online airfare and hotel prices, and maps the CPI forecast to core PCE. The report also separately assesses the impact of data sources and methodological revisions for the core PCE portfolio management fees component.

Methodology notes

• Inflation ForecastingCPI Component Weighted Forecast

  Aggregate headline and core CPI based on each component's weight and monthly price forecast.

  The report forecasts components such as autos, housing, medical care, travel services, and communications separately, then applies core CPI weights to form a 0.19% core inflation forecast.

• Alternative DataHigh-Frequency Price Signal Tracking

  Use online and industry data before official statistical releases to assess price direction.

  Used car auction prices, dealer incentives, online insurance premiums, jet fuel, and online travel prices are used to calibrate related CPI components.

• Indicator MappingCPI-to-Core PCE Conversion

  Derive core PCE by combining differences in weights and definitions between CPI and PCE.

  The July core CPI forecast corresponds to a 0.26% month-on-month increase in core PCE, mainly because the portfolio management fees component is expected to be pushed up with a lag by the rise in stock prices in the second quarter.

• Statistical Method AssessmentCore PCE Methodology Revision Scenario Analysis

  Assess the initial and subsequent revisions to historical inflation readings caused by changes in data sources.

  The new methodology at the end of September is expected to initially estimate portfolio management fees using wage data, lowering the preliminary July core PCE reading to 0.21%; after the third-quarter Quarterly Services Survey is released in December, fee data may push the reading back up.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• US Treasuries

  CPI forecasts slightly below consensus are typically favorable for bond prices and may push yields lower.

  Strengths

  Continued slowing in housing inflation, lower energy prices, and the forecast of core CPI around 0.2% in the future provide support.

  Weaknesses

  Core PCE may be stronger than core CPI due to an increase in portfolio management fees.

  Comparison

  Goldman's forecasts for both July headline and core CPI are slightly below consensus.

  Risks

  Persistent oil market disruptions or further oil price increases could push up inflation and yields.

• US Dollar

  A below-consensus inflation reading could weaken short-term rate support and create marginal pressure on the dollar.

  Strengths

  If rising oil prices keep inflation sticky, the dollar could still receive support from interest rate differentials.

  Weaknesses

  Weaker housing and tariff-related price pressures could reinforce expectations of cooling inflation.

  Comparison

  The forecast is mild relative to consensus, but the core PCE signal is stronger.

  Risks

  An upside CPI surprise or sustained rise in oil prices could reverse the weaker impact.

• US Equities

  Moderate CPI usually helps reduce discount-rate pressure, but sector impacts are differentiated.

  Strengths

  Inflation slightly below expectations is favorable for rate-sensitive assets, and falling hotel prices also reflect some easing in services price pressure.

  Weaknesses

  Rising airfares, used car, and consumer electronics prices show that some cost pressures remain.

  Comparison

  The headline inflation forecast is relatively mild, while services and goods components are mixed.

  Risks

  An oil price shock could simultaneously raise corporate costs, inflation expectations, and market discount rates.

• Crude Oil and Energy-Related Assets

  Oil prices are the main upside inflation risk identified in the report and affect CPI through gasoline and jet fuel.

  Strengths

  If oil market disruptions persist, energy prices and related assets may receive support.

  Weaknesses

  Energy CPI is expected to decline 2.0% month-on-month in July, indicating weak retail gasoline prices during the month.

  Comparison

  Energy prices dragged on headline CPI during the month, but the future direction of risk is upward.

  Risks

  Oil price trends and pass-through to retail energy prices may deviate from the report's assumptions.

Key data

• July core CPI month-on-month forecast0.19%Consensus is 0.2%.
• July core CPI year-on-year forecast2.47%Consensus is 2.5%.
• July headline CPI month-on-month forecast0.05%Consensus is 0.1%.
• July headline CPI year-on-year forecast3.35%Consensus is 3.4%, and June was 3.53%.
• Food prices month-on-month forecast0.2%Contributes upward to headline CPI.
• Energy prices month-on-month forecast-2.0%Falling retail gasoline prices are an important reason for weaker headline CPI.
• Used car prices month-on-month forecast0.5%Based on used car auction price signals.
• Auto insurance prices month-on-month forecast-0.5%Online data indicate insurance premiums declined.
• Owners' equivalent rent month-on-month forecast0.23%This component accounts for about 33% of core CPI.
• Primary residence rent month-on-month forecast0.16%Reflects continued slowing in the underlying housing inflation trend.
• Airfare prices month-on-month forecast2.0%Affected by pass-through from the rebound in jet fuel prices in July.
• Hotel prices month-on-month forecast-1.0%The price boost from the World Cup continues to fade.
• July core PCE month-on-month forecast0.26%The portfolio management fees component is expected to rise significantly; the initial reading could fall to 0.21% after the methodology revision.
• Core CPI month-on-month forecast for the coming monthsabout 0.2%Based on slowing housing inflation, a smaller contribution from tariff-related price increases, and a reversal of airfare pressure.

Impact & implications

If the actual data are close to the forecast, core and headline CPI slightly below consensus could ease market concerns about a renewed near-term acceleration in inflation and provide some support for US rates assets. However, headline CPI year-on-year remains elevated, and core PCE may still be temporarily boosted by portfolio management fees, so this should not be simply interpreted as a comprehensive fading of inflation pressure. Oil prices and jet fuel prices remain key variables for the inflation path and market pricing in the coming months.

Risks

• Oil market disruptions and related oil price increases last longer than expected, potentially pushing up energy, airfares, and overall inflation.
• Alternative price data may deviate from final official CPI sampling results.
• The contribution from tariff-related price increases may be higher than expected or fade more slowly than forecast.
• The core PCE portfolio management fees component will undergo a methodology revision, and the July reading may first be revised down and then revised up again.
• Volatile components such as used cars, insurance, airfares, and hotels may lead to forecast errors.

What to watch

• Whether July core CPI month-on-month is close to 0.19%, and whether year-on-year falls to about 2.47%.
• Whether the decline in energy prices can keep headline CPI month-on-month around 0.05%.
• Whether the slowing trend in owners' equivalent rent and primary residence rent continues.
• Whether the rise in used cars and the decline in auto insurance can offset each other.
• The strength of pass-through from the jet fuel rebound to airfare prices, and whether hotel prices continue to fall.
• The magnitude of the initial downward revision to July data from the core PCE methodology revision at the end of September.
• Whether the portfolio management fees component is revised up again after the third-quarter Quarterly Services Survey is released in December.
• The impact of oil market disruptions, oil prices, and tariff-related prices on core inflation in the coming months.