The April CPI rose .4% both headline and core just as anticipated. The y/o/y gains are 4.9% and 5.5% respectively vs 5% and 5.6% in the month prior. Energy prices were up .6% m/o/m though down 5.1% y/o/y. Food/beverage prices were up .1% m/o/m and higher by 7.5% y/o/y.
Services inflation ex energy was higher by .4% m/o/m and 6.8% y/o/y. OER, the biggest component, was up .5% m/o/m and 8.1% y/o/y. Rent of Primary Residence was up by .6% m/o/m and 8.8% y/o/y. These continue to overstate rental trends however as we know, and which are running closer to 3.5-4% y/o/y on a blended basis. Medical care costs were unchanged m/o/m after a string of declines and mostly led by the drops in healthcare insurance costs (down 3.8% m/o/m and 15.8% y/o/y) for the quirk reason stated here each month. There continues to be major inflation in both motor vehicle maintenance (up .5% m/o/m and 13.3% y/o/y) and car insurance (up 1.4% m/o/m and 15.5% y/o/y), as I mentioned the other day from Progressive’s earnings call). Eating at restaurants costs one tenth more m/o/m and 7.2% y/o/y. Hotel prices fell back 3.4% m/o/m but after rising by 3.1% in March and 2.6% in February. They are up 3.5% y/o/y. Airline fares fell 2.6% m/o/m but only after jumping by 4% in March. They are little changed y/o/y, down by .9%.
Core goods prices are accelerating again, up by .6% m/o/m and 2% y/o/y. Following the rise seen in the Manheim index over the past few months, it showed up on the retail side with a 4.4% spike in used car prices in the month, though still down 6.6% y/o/y. New car prices fell .2% m/o/m but after gaining by a .4% in the month before. They remain up 5.4% y/o/y. Apparel prices rose .3% m/o/m and have continued to steadily increase and are higher by 3.6% y/o/y. After a robust string of price gains, ‘household furnishings and supplies’ saw prices fall .4% m/o/m but after a similar gain in March and an .8% gain in February. They are still up 4.8% y/o/y.
Bottom line, while the headline figure continues to drop, the core rate has remained rather sticky this year as it finished 2022 at 5.7 and has rotated between 5.5% and 5.6% this year. We know though that we have a slowdown in rents to come that will show up in the calculations and core inflation will continue to fall. I’ll still say again though, while inflation could see a 2 or 3 handle by yr end, it is where it settles out at on a sustainable basis in 2024 that should be most relevant. With no upside seen in CPI relative to expectations and the assumption that the y/o/y gains will slow further in coming months, the 2 yr yield is falling back below 4% and the 10 yr yield is back under 3.5%. The dollar is higher in turn and gold is back above $2,050. The 5 yr inflation breakeven is lower by 3 bps to 2.20% but is unchanged on the week so far.
Core CPI