U.S. headline consumer price inflation rebounds in April, core rate likely to continue rising

The U.S. headline consumer price inflation rebounded sequentially in April after falling in March. The CPI index rebounded to 0.2 percent after a 0.1 percent fall in March. That took inflation to 2.5 percent year-on-year, continuing its upward march since last June.

Energy prices rose 1.4 percent helping headline inflation buoy in April, as prices at the pump rise 3 percent. Energy prices rose 7.9 percent higher on a year-on-year basis, largely reflecting rises in petroleum-related prices.

Core inflation rose 0.1 percent sequentially in the month, coming is a bit below expectations. On a year-on-year basis, core rate remained stable at 2.1 percent in April. The slight loss of momentum in core inflation was because of core services prices, which rose 0.2 percent in the month. Meanwhile, core goods prices dropped 0.1 percent sequentially.

Looking into details on services, shelter inflation stayed healthy, rising 0.3 percent on the month. But other services prices were weaker. Overall inflation for core services stayed 2.9 percent in the month. While core goods prices stayed in deflationary territory, some significant items saw increased price pressures.

Also, food prices saw a marked rise of 0.3 percent, the largest rise in more than one year. On a year-on-year basis, food inflation continued to be modest at 1.4 percent; however, it has been trending upwards in for the past 18 months.

April’s data shows that while inflationary pressures are expected to continue to rise, it is unlikely to be a linear process, noted TD Economics in a research report. There is some residual seasonality in price measures in the U.S., where hot price rises early in the year are followed by a period of weak readings.

“We continue to expect core inflation to continue to rise as a strong economy and wage pressures see price hikes percolate through the economy (see our recent report)”, said TD Economics.

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