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CPI: Slowly Cooling

economic report
CPI
April 12, 2023
Bottom Line: Consumer prices rose only slightly in March, in line with expectations, as energy prices fell. Core CPI was up 0.38%, down just slightly from 0.45% in February. Owner's Equivalent Rent (OER), the largest component of core, was up 0.48%, notably lower than the 0.7% reading in February. Medical care services were lower for the second month and were trending towards deflation as the cost of hospital and related services fell. Used car prices were surprisingly lower, countering expectations for an increase based on the major private market surveys of prices. However, new car prices were up, as were vehicle leasing deals. Airfares rose sharply, again, up nearly 4% on the month after a 6+% increase in February.
Overall, this was an encouraging report for Fed policymakers looking for a continued deceleration in inflation. While pockets of core price pressures remain, the "services less shelter" category, often cited by Fed Chair Powell, fell in February. And shelter prices finally look to be edging lower, consistent with the long lag between actual rents and the imputed rent in CPI.

The CPI ROSE by 0.05% in March, compared with market expectations for an increase of 0.20%.
  • Food prices increased by 0.01% while energy prices fell by 3.5%.  
  • Prices for gasoline fell by 4.6% while prices for fuel oil declined by 2.5%, prices for electricity slipped by 0.7%, and prices for natural gas fell by 7.1%.  Energy prices are now 6.4% BELOW their year-ago level. 
Overall consumer prices are now 5.0% ABOVE their year-ago level; in March 2022, consumer prices were 8.5% ABOVE their year-ago level.
                                         
The Core CPI ROSE by 0.38%, compared with market expectations for an increase of 0.40%.
  • Prices for commodities excluding food and energy commodities rose by 0.2%.
  • Prices for services excluding energy services rose 0.4%, with a moderate increase in transportation (+1.4%), shelter (+0.6%), and owner's equivalent rent (+0.5%).
Core consumer prices are now 5.6% ABOVE their year-ago level; in March 2022, consumer prices were 6.5% ABOVE their year-ago level.
Article by Contingent Macro