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October, 2018 7:44 AM



US consumer prices rebound 0.2% in April on jump in gasoline

US consumer prices rebound 0.2% in April on jump in gasoline

US consumer prices rebounded in April after dipping in March, driven by a surge in gasoline prices and an uptick in housing costs, but the Labor Department report Thursday was tamer than expected.

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11.05.2018 08:25 AM

US consumer prices rebounded in April after dipping in March, driven by a surge in gasoline prices and an uptick in housing costs, but the Labor Department report Thursday was tamer than expected.

Food prices also rose, as did medical services, but cell phone services -- which had been blamed for the bafflingly low inflation last year -- were flat after finally rising in March.

The Consumer Price Index, which tracks costs for household goods and services, rose 0.2 percent compared to March, seasonally adjusted. 

And the index was up 2.5 percent from April 2017, continuing its rising trend and putting it a half point above the Federal Reserve's inflation target.

Analysts say the details of the report are fairly benign, cheering Wall Street which posted solid gains since the data was viewed as reducing odds the Federal Reserve will need to raise interest rates more aggressively.

The CPI rebound was pushed by a three percent jump in gasoline prices last month, which recouped a large part of the 4.9 percent decline posted in March, the report showed. 

Shelter costs -- which include rent and an equivalent measure for homeowners -- were up a more modest 0.3 percent, but that category has a much bigger impact on the headline CPI number and has been trending up in recent months.

Food prices also rose 0.3 percent in the month.

However, excluding the volatile food and energy components, "core" CPI rose just 0.1 percent and was 2.1 percent higher than the same month of last year.

Good news

The CPI results were weaker than analysts had been expecting.

"There's even more good news in this report than suggested by the surprise relief in the core," Chris Low of FTN Financial said. 

"Goods prices are falling outright and there are declines throughout services." 

He said if not for the owners-equivalent rent component, "a flaky series if there ever was one –- the core would have fallen."

And Mickey Levy of Berenberg Capital said the price trend is stabilizing, which "should quell concerns for now about a widespread and sustained heating-up of inflation."

But for the first four months of the year CPI is running at a 2.6 percent seasonally adjusted annual rate, while core is 2.4 percent, both a full point higher than at this point in 2017, according to Labor Department calculations.

So some analysts see that as proof inflation is continuing to move higher.

Meanwhile, wage data showed hourly earnings, adjusted for inflation, were flat in the month.

Fed policymakers closely watch wage and price data to decide when to raise interest rates, although they focus on a different inflation indicator, the Personal Consumption Expenditures price index.

"This CPI report does not change our view that core inflation is trending gradually higher and that core PCE price inflation will hit and possibly move slightly above the Fed's 2% target for inflation in the second quarter," RDQ Economics said in a research note.

That debate is key for Wall Street, which has been on edge about the possibility the Fed could raise interest rates more aggressively.

They might possibly be cheered by one data point in the CPI report: the cost of whiskey at home fell 0.3 percent in April.
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