- Core CPI was a smidge lighter than expected, but largely ignored by markets
- US CPI, headline/core, m/m % April, SA:
- Actual: 0.22 / 0.24
- Scotia: 0.3 / 0.3
- Consensus: 0.3 / 0.3
- Prior: -0.1 / 0.1
Stale CPI was a touch lighter than expected. At 0.24% m/m, core CPI was on the heavy side of 0.2 and one one-hundredth away from rounding up to the 0.3% consensus call.
At 2.9% m/m SAAR in April, 0.7% in March, 2.75% in February and 5.5% in January, don’t expect the FOMC to describe ytd underlying inflation as being light (chart 1). They'll still emphasize above-target underlying pressures for core CPI, and for core PCE that arrives on May 30th. At 2.6% y/y in March, core PCE was still on the high side.
Having said that, it’s the last CPI print before things begin to get more interesting through incorporation of tariff effects over coming months. Hence stale.
That’s probably why markets largely ignored the readings. The 2-year Treasury yield is down 1bp with June still a hold. The dollar is flat. S&P futures were basically unchanged.
The FOMC—particularly Chair Powell—also won’t much care about the figures. They want reams of dual mandate data in order to be able to determine whether policy effects—namely from tariffs—cause more of a departure for price stability or full employment goals before determining what to do. That is likely to take a long time yet, and year-to-date data doesn’t matter in that regard versus forward-looking risks. And so I’ll keep this one brief with the usual top notch help from Jay Parmar.
Even at a hair beneath consensus, core CPI was overstated by a new record high SA factor when comparing like months of April over time (chart 2).
Core goods prices (ex-food and energy) were soft at 0.1% m/m SA which was mildly firmer from -0.1% previously, but several categories are likely to be hit by tariffs going forward.
Core services CPI (ex-shelter and energy services) was up 0.2% m/m SA from -0.2% prior.
Shelter CPI performed about as expected at 0.3% m/m with primary rent up 0.3% and owners’ equivalent rent up 0.4%.
Several other goods categories were light but awaiting tariff effects that could also move through services.
Vehicles were softer than expected with new vehicle prices flat (about as expected) but used vehicle prices were down 0.5%. Just wait for tariff effects on new vehicle prices and for substitution effects to raise used vehicle prices.
Clothing prices slipped -0.2%. Again, wait for tariffs.
Food was surprising at -0.1% m/m and led by groceries (-0.4%) but again, just wait for tariffs. Food away from home (restaurants, take-out etc) was up 0.4% and also likely to be hit by tariff pass through effects.
Gasoline prices were soft at -0.1% and inconsequential to the report as expected.
Please see charts 3–18 for individual component charts, charts 19–20 for y/y break downs of the basket and weighted contributions to total y/y CPI, charts 21–22 for the m/m equivalents, and finally the detailed table including micro-charts.
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