Consumer Inflation Shows Lower but Mixed Readings for March

Following an unexpectedly negative Producer Price Index (PPI) for March, the Consumer Price Index (CPI) also showed that consumer inflation was weaker than expected for the month.

The headline CPI was up only 0.1% on the monthly reading, less than the 0.2% called by Bloomberg. CPI’s core reading, which excludes food and energy, was up 0.1% in March, less than the 0.2% expected by Bloomberg and lower than the February reading of 0.3%.

The year-over-year headline data seemed a tad better on the surface, rising 0.9%, but it was lower than the 1.0% gain in February’s annualized report. The core annualized CPI (excluding food and energy) rose by 2.2%, also down slightly from the 2.3% annualized report seen in February.

As a reminder, the Federal Reserve wants inflation in a target range of 2.0% to 2.5%. A lack of evidence of inflation diminishes the Fed’s case to raise interest rates very much or even at all.
[nativounit]
The U.S. Department of Labor indicated that pricing softness was evident in apparel, shelter (rent) and health care.

Thursday’s CPI report, when combined with Wednesday’s negative PPI report, suggests that March’s core PCE price index was barely positive, was slower than in February and would indicate prices being up only 1.5% or so from a year earlier.

Another issue to consider is that this slight pullback in the data is on the heels of two strong monthly readings. The long and short of this is that the recent trends for stronger core inflation have slowed, but those trends are still staying above the pace seen throughout the prior year.