US consumer prices rose 0.1% (month-over-month) in April, bang on survey expectations. Core CPI (excluding food and energy) rose 0.3%, ahead of the consensus call for 0.2%. On a year-over-year basis, overall consumer price inflation fell to -0.2% (from -0.1%), while core inflation remained steady at 1.8%.
While the pull of low energy prices kept headline consumer price inflation in negative territory, this was not a soft report. The continued growth in services spending suggests that despite global headwinds, price pressures in the domestic economy are steadily building.
The growth in medical care services prices was the strongest since November 1990 and suggests that the last few years of disinflation in healthcare costs may be over. This will have broader implications not only for future inflation but also government budgets.
There are some signs in this report of the disinflationary impact of the dollar, particularly in falling apparel prices. These may continue over the next several months, but given the dollar's recent pullback, this trend is less of a concern for the medium-term inflation outlook.
"The bottom line is that with energy prices slowly rebounding and the dollar's rise coming off the boil, downside risks to the inflation outlook appear to have diminished. This puts the Fed's focus squarely on the economic data, where we await signs of a more robust rebound following the disappointment early in the year." said Capital Economics
