US CPI dips in April, but by less than expected as food costs jump

The cost of living in the US dipped last month, but not by as much as anticipated as food prices continued to run up.

According to the Department of Labor, in seasonally adjusted terms the annual rate of headline consumer price inflation slipped from 8.5% in March to 8.3% for April.

In month-on-month terms meanwhile, CPI rose by 0.3% after jumping by 1.2% during March.

Economists had forecast a modestly larger decline in the annual rate to 8.1%.

At the so-called core level however, the move lower in CPI was nearer the mark.

Annual core CPI, which excludes from the calculation what are typically the most typical categories, food and inflation, slipped from 6.5% to 6.2% (consensus: 6.1%) but was 0.6% higher on the month.

Food prices clocked in with another sharp gain on the month of 0.9%, marking six nearly consecutive month of such increases.

Energy inflation dropped by 2.7% versus March, the cost of used cars and trucks by 0.4% and that of apparel by 0.8%.

New vehicle prices were up by 1.1%, those of transportation services by 3.1% and those of medical care services by 0.5%.

Commenting on the potential implications of the latest inflation numbers, Andrew Hunter, senior US economist at Capital Economics, said that they would likely "strengthen the Fed’s resolve to continue hiking rates by 50bp at the next couple of meetings".

Renewed speculation of a larger 75bp move or even inter-meeting move were also possible, he said.

Nonetheless, Hunter added that signs of a tentative easing in goods shortages and that wage growth was set to slow, a "more pronounced" decline in consumer prices "will allow officials to slow the pace of tightening in the second half of the year".

For his part, Neil Wilson, chief market analyst at Markets.com, chipped in telling clients: "Big simple binary response in the markets with yields up, dollar up, stock futures down, gold down. Bitcoin, now tightly correlated with the Nasdaq and risk in general, fell sharply too. That would be the great inflation hedge against money printing right?

"Does it really change what the Fed does? I don’t think one hot CPI print makes a summer [...] but the core reading has spooked lots of folks who had got the wrong side of this and had tried to second guess a softer reading than we got. Less peaking and more plateauing…higher for longer."