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April US CPI Expected to Rise 0.2%, Core Up 0.3%, Base Effects Lift Year-Over-Year Rates

05/11/2021 10:30

02:18 PM EDT, 05/11/2021 (MT Newswires) -- The Consumer Price Index is expected to rise 0.2% in April after a 0.6% March increase, according to a survey compiled by Bloomberg, as energy prices finally retreat after a string of gains.

The same survey also sees a 0.3% increase in core CPI, excluding the volatile food and energy components, following a 0.3% gain in March.

This month's report should include another acceleration in the year-over-year inflation rates, lifting it further above the 2% target. In March, the rate jumped to 2.6% for overall CPI and to 1.6% for core prices.

The data will be released at 8:30 am ET on Wednesday.

Analysts anticipate that energy prices, particularly gasoline prices, will slip after several months of large increases. Seasonal adjustment factors expect unadjusted energy prices to rise sharply going into the spring driving season, so a smaller-than-usual unadjusted gain will translate into an adjusted decline after a 5% jump in March.

Food prices are expected to maintain their trend of small gains, posting a modest increase after a 0.1% gain in March.

"Food prices will only make a small contribution, but core services, rents, and the (owners equivalent rents category) will all push the core higher," Jefferies said in a research note.

Normal rents and owners' equivalent rent categories both rose by 0.2% in March. The two categories combine for nearly one-third of overall CPI.

Lodging away from home prices, such as at hotels, are also expected to rise given the renewed demand for travel.

The expected monthly changes in overall and core CPI, combined with the large declines last spring, would lift the year-over-year rate for the headline reading to 3.6% from 2.6% in March, while the core measure would rise to 2.3% from 1.6%.

"Base effects on their own would drive inflation from 2.6% to 3.3% y/y and core from 1.6% to 2.1%," Scotia Economics said in a research note. "Supply chain pressures and seasonal influences on month-over-month price changes account for the rest. Such peaks-and the next month could see headline cross 4%-may be transitory, but we should be careful and not go too far with that view."

Federal Reserve officials have already acknowledged that the upcoming inflation spike is likely to be temporary and will have no impact on policy decisions unless those rates remain above target for an extended period.

Some analysts, however, including Daiwa, suggest that supply chain issues will keep the inflation rate high even after the bases effects diminish, forcing the Fed to confront accelerating inflation sooner than expected.