CPI came in a little softer than expected in April (up 0.2 percent) amid a more tempered gain in the core index, explained analysts at Wells Fargo. They see the softer core print likely reflecting some exaggerated strength in Q1.
Key Quotes:
“Energy prices reversed course in April, rising 1.4 percent after a pullback in March. Gasoline prices are beginning to put a noticeable dent in consumer purchasing power, having risen 13.4 percent over the past year.”
“After a hot first quarter, where core CPI rose at the fastest clip in 12 years, inflation ex-food and energy cooled in April. In our view, the slowdown likely reflects exaggerated strength early in the year, rather than an end to the strengthening trend in underlying inflation.”
“Core services inflation in April eased to 0.2 percent. Shelter prices, which account for about 40 percent of the core index, continue to be a primary source of support,
“Although inflation came in a bit softer than expected in April, we do not believe this will prevent the Fed from raising rates another three times this year.”
“We expect inflation to rise further in the months to come. Most immediately, the return of $70 oil stands to push up monthly readings of headline inflation at least through May. While we see oil falling in the second half of the year, prices are expected to remain above the levels that prevailed a year ago.”
“We expect core CPI to rise to 2.3 percent by Q3 as rising labor and material costs lead more firms to raise prices.”
Share
