CPI: Headline Misses, Core Ticks Higher

Bottom Line: Headline consumer inflation fell in March compared to expectations for no change. Core prices are now 2.1% above year ago levels. "Owners' Equivalent Rent" (a major component of core CPI that is an estimate of the cost of shelter) was a touch higher than we expected. Still, the trend remains towards a slight deceleration in this component. Medical care prices (over 10% of core when including both the service and commodity components) were are also a touch higher but are still showing deceleration on a trend basis. Nonetheless, the trend in these components bears watching. Overall, the trend rate of both core and headline inflation could now be considered modest to moderate, a slight upgrade to the trend description. The CPI FELL by 0.1% in March, compared with market expectations for no change.

• Food prices increased by 0.13% while energy prices fell by 2.8%. Prices for gasoline fell by 4.9% while prices for fuel oil declined by 0.8%, prices for electricity climbed by 0.0%, but prices for natural gas fell by 1.2%.
• Energy prices are now 7.0% ABOVE their year ago level.
• Overall consumer prices are now 2.4% ABOVE their year ago level; in March 2017, consumer prices were 2.4% ABOVE their year ago level.

The Core CPI ROSE by 0.2%, compared with market expectations for an increase of 0.2%.

• Prices for commodities excluding food and energy commodities fell by 0.1%. Gains in alcoholic beverages (+0.1%), medical care (+0.1%), were offset by declines in apparel (-0.6%), used cars & trucks (-0.3%).
• Prices for services excluding energy services rose 0.3% with moderate increase in medical care services (+0.5%), shelter (+0.4%), and owner's equivalent rent (+0.3%).
• Core consumer prices are now 2.1% ABOVE their year ago level; in March 2017, consumer prices were 2.0% ABOVE their year ago level.