11.06.2001
CPI edges up 1.0% in October, topping expectations

• CPI rose 1.0% YoY and 1.5% MoM in Oct., coming in above both our own and the market's deflationary expectations. The goods price index, despite weak consumer sentiment and record unemployment, surged 1.5% compared to Oct 2000 and 2.6% from Sept, while the services price index rose 0.3% YoY and 0.2% MoM. However, deflationary pressure should persist and we are forecasting flat YoY CPI growth in 2001. In our view, weak domestic demand will fend off inflationary pressure on goods prices while unprecedented unemployment holds back wage hikes. Going forward, the latter development will act to hold back consumption growth and put a lid on inflation.