U.S. Data Pulse: CPI: April CPI: Rents and oil push, softer tariff push

Research evidence excerpt

U.S. Data Pulse: CPI: April CPI: Rents and oil push, softer tariff push

UpdateM

April CPI

CPI came close to our expectations, with core prices rising 0.38% m/m in April (MS:

0.36%, consensus: 0.3%) and headline prices up 0.64% m/m (MS: 0.64%). These readings

put core CPI at 2.8% y/y and headline CPI at 3.8% y/y.

Using today's CPI data we revised up our April core PCE inflation forecast to 0.26% m/

m from 0.22% prior to the CPI release, reflecting stronger than expected core goods

inflation.

As we highlighted in our CPI preview last week, there were three main questions leading

to this report. First, as in previous prints, a key question was whether the effect of tariffs

on goods prices continues to fade. A second question was the magnitude of the shutdown

payback on rents. And, third, a key focus was on whether there was evidence of

broadbased spillovers from oil prices into core inflation.

Tariff pass-through continued but decelerated. On tariffs, the data indicates that the

pass-through continued but it has decelerated since February.

We now estimate that tariffs have lifted the price level by roughly 64bp so far, close to

the total effect implied by our models (around 70bp). We expect core goods inflation to

normalize gradually over the next few months as the tariff impulse approaches its end.

Oil spillovers to core continue to be narrow. Oil prices pushed gasoline prices for a

second consecutive month, keeping headline inflation significantly higher than core.

However, the spillover to core inflation continues to be mild. The only core component

showing visible signs of acceleration due to oil is airfares, with a second consecutive

positive m/m reading (at 2.82% m/m).

Shelter payback close to our expectations. As expected rents m/m inflation spiked in