- Core CPI was weaker than expected ahead of accelerating pressures…
- ...which makes the market reaction look a tad ridiculous
- US CPI, m/m % // y/y, March, SA:
- Actual: -0.05 / 2.41
- Scotia: 0.1 / 2.5
- Consensus: 0.1 / 2.5
- Prior: 0.2 / 2.8
- US core CPI, m/m % // y/y, March, SA:
- Actual: 0.06 / 2.81
- Scotia: 0.2 / 2.9
- Consensus: 0.3 / 3.0
- Prior: 0.2 / 3.1
That’s it folks, there’s no inflation in the US economy, none ahead either. Nope, Navarro is rrr…rrrii..riiiggh…..ack, I can’t do it! The initial market reaction to weaker than expected US CPI was more about positioning covering that subsequently reversed when reality sank in again. The US economy remains in excess demand and is imposing a large tariff shock upon itself even after yesterday’s temporary tweaks. Sharp inflationary pressures lie ahead. Also recall that we’re coming off earlier distortions like weather effects, tariff front-running, LA fires etc.
Chart 1 shows the sudden plunge of core CPI to its weakest m/m reading since January 2021. Chart 2 shows that much of this was driven by core services CPI (ex housing and ex-energy) that hit the lowest m/m reading since May 2020. Core goods CPI was also soft (chart 3, next page).
Chart 4 shows this was an abnormally weak core CPI print compared to other seasonally unadjusted March readings in history and chart 5 shows that it would have been weaker yet if not for one of the strongest SA factors on record. Please see charts 6–25 for components and the summary table that includes further detail and charts.
This is just one soft month after a string of warm ones and ahead of a wave of influences.
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