Source: Economics Group of Wells Fargo Bank, N.A.
Summary
After an unexpected slide in March, the monthly change in the CPI in April is likely to rebound to its six-month trend. We look for the headline CPI to rise 0.2% in April, leading the year-ago rate to dip to a four-year low of 2.3%. We would not be shocked to see a 0.3% rise if some volatile components bounce back more than expected. Excluding food and energy, we forecast the core CPI to rise 0.25%, keeping the annual rate unchanged at 2.8%. Preemptive inventory building and fears of consumer pushback should keep the anticipated acceleration in consumer prices at bay until at least May. Yet beneath the surface, the subsiding trend in core services inflation will be juxtaposed with core goods inflation that is incrementally strengthening.
Sticker Shock on Hold
The March CPI report delivered the best of both worlds. There were few signs of tariffs igniting a widespread pickup in goods prices, while the downward trend in services inflation intensified. A repeat of March’s quiescent figures will be hard to come by in April. After slipping 0.1% in March, we estimate headline CPI rebounded 0.23% last month. Core CPI similarly looks set to bounce back from what was the smallest gain in four years (0.06%) with a 0.25% increase in April.