US: Headline CPI inflation expected to slip to 2.3% y/y in April – TDS

In view of the analysts at TDS, US headline CPI inflation is expected to slip to 2.3% y/y in April, with prices up 0.2% on the month.

Key Quotes

“We look for energy prices to decelerate further from their February highs with gasoline prices (seasonally adjusted) fairly muted on the month. Further firming in food prices is likely, especially accounting for adverse weather and labor shortages cited by farmers. On a downbeat note, we expect a 0.1% print on the core index, leaving the core inflation rate unchanged at 2.0% y/y. This should reflect a further, albeit more modest drag from wireless services prices along with continued deflation in vehicle prices.”

“The April PPI report, which saw strong and broad-based increases across goods and services price categories, is supportive for a solid rebound in the core CPI. But weakness in goods prices (e.g., vehicles) and wireless services prices remains a key source of downside in April, hence we remain comfortable with our 0.1% call.”

“Moreover, outside of these pockets of weakness, we believe a firming trend remains in place on steady strength in the remaining price categories of services and a slow recovery in goods prices. Labor fundamentals strengthen this view with slack essentially diminished. Such a backdrop of tighter labor market conditions will be the driving force behind the timing of the next Fed rate hike, which is still likely in June in our view.”