US core CPI falls more sharply than expected in April

The cost of living in the US fell more quickly than expected last month, amid sharp drops in the price of energy, apparel and transportation services.

According to the Bureau of Labor Statistics, the US consumer price index fell at a month-on-month pace of 0.8% in April, pushing the year-on-year rate of increase in headline CPI down from 1.5% for March to 0.3% (consensus: 0.4%).

Within the headline CPI, food prices increased by 1.5% but those for energy plummeted by 10.1%.

At the core level, which excludes food and energy prices, the annual rate of CPI inflation slowed from 2.1% to 1.4% (consensus: 1.7%).

New vehicle prices were unchanged on the month, but those for new cars and trucks fell by 0.4% while those of apparel and for transportation services both dropped by 4.7%.

Services prices outside of energy meanwhile declined by 0.4% against March.

Commenting on the outlook for core CPI, Ian Shepherdson at Pantheon Macroeconomics said: "Core CPI inflation has now dropped to 1.4% from 2.4% just two months ago.

"We expect a further decline, taking it below 1% by July, but we don’t expect sustained deflation. The collapse in clothing prices, for example, will be limited by the rotation of seasonal inventory and the reopening of retail stores, while airline traffic and hotel occupancy rates are now gradually rising, albeit from incredibly depressed levels."