CPI Undershoots But Core Inflation Stays Stubborn: JP Morgan

The Consumer Price Index (CPI) was 2.3% higher than a year ago, the Bureau of Labor Statistics said Tuesday, below the economists’ expectations of 2.4% and the previous reading.

The monthly gain was 0.2%, rebounding from a prior decline of 0.1%, yet falling short of a 0.3% forecast.

The core CPI rose to 2.8% on an annual basis, unchanged from both the previous and expected 2.8%.

Month over month, it increased 0.2%, inching higher from the 0.1% uptick in March but below expectations of 0.3%.

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Shelter remained a major contributor to inflation, rising 0.3% in April and accounting for over half of the monthly increase in the overall Consumer Price Index. Meanwhile, several categories posted price declines, including airline fares, used cars and trucks, communication services, and apparel.

JP Morgan writes, “Despite an overall cooler-than-expected report, the April CPI likely shows modest tariff pass-through with several hardlines retailers taking price ahead of costs.”

On a quarterly basis, the most significant price drops compared to the fourth quarter were seen in TVs, sporting goods, auto parts (which moved from rising to falling prices), and motor oil/coolant/fluids (where prices are still rising but at a slower rate).

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Meanwhile, prices went up or dropped less sharply in categories like building products, which shifted to rising prices, toys/games/hobbies/playground equipment, helped by price increases noted by companies like Hasbro Inc HAS and Mattel Inc MAT, pet food (smaller price declines), and home furnishings (prices increased).

Inflation for food at home dropped by 0.4 percentage points from last month, now sitting just above 2% year-over-year.

Grocery prices rose by about 0.4 percentage points during the recent retail quarter, and analyst Christopher Horvers expects more price increases in the second quarter.

Pet food prices increased slightly, rising 0.3 percentage points from the previous month, though they’re still down 0.6% compared to last year.

Looking at two-year trends, food-at-home inflation dipped about 0.2 percentage points, while pet food prices fell by roughly 0.8 percentage points.

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