US: Substantial slowdown in core PCE price inflation? - Nomura

Analysts at Nomura note that the US CPI rose 0.2% (0.221%) m-o-m in April, below expectations (Nomura: +0.312%, Consensus: +0.3%).

Key Quotes

“Regarding non-core components, food prices showed a strong increase of 0.3% m-o-m as we had expected, while energy prices rose 1.4% m-om, slightly weaker than our forecast of +1.9%, largely due to lower electricity prices. More important, excluding food and energy, core CPI also came in weaker than expected, increasing only modestly by 0.1% (0.098%) m-o-m, compared with expectations of a 0.2% gain (Nomura: +0.169%, Consensus: +0.2%).”

“Incoming information points to a substantial slowdown in m-o-m core PCE price inflation in April to 0.056% from 0.153% in the previous month. That forecast would translate into a y-o-y change of 1.8% (1.753%) in April, down 0.1pp from 1.9% (1.882%), previously. As discussed after the April PPI data release (PPI Components Indicate Downside Risk to April CPI Report, 9 May 2018), relevant PPI inflation measures decelerated and likely exerted some disinflationary pressure on the April core PCE price index. That said, given that some of the expected deceleration in core inflation in April seems transitory, we did not change our medium-term forecast substantially.”