US CPI inflation retreats unexpectedly in March

Inflation pressures in the US at the consumer level decreased in March, as food and utility gas prices declined, missing economists' forecasts by a wide margin.

Apparel and used cars and truck prices were also sharply lower, with both falling by 0.6%.

Energy prices on the other hand bounced back 0.9% after dropping 6.0% in February. However, the largest increase was seen in the price of medical care services.

Together with large rises in the cost of shelter and transportation services they drove the headline consumer price index higher by 0.1% month-on-month, although versus a year ago was only 0.9% higher, according to the Bureau of Labor Statistics.

Economists had forecast CPI would advance by 1.2% year-on-year.

BLS revised its estimate for February’s rate of price increases down by one tenth of a percentage point to 1.0% year-on-year.

‘Core’ CPI, which excludes the more volatile components such as food and energy, edged higher by 0.1% month-on-month (consensus: 0.2%).

A drop 1.8% month-on-month drop in the prices for lodging was the main factor driving the annual rate of core CPI down from 2.3% to 2.2%.

“The weaker dollar has slowed the drop in goods prices, the tight market is boosting rents, and upward pressure on wages is lifting other services components.

“We still expect core CPI inflation to end this year at 2.6%, with core PCE at 2.0%, hitting the Fed's target a full two years before the FOMC's forecasts,” Ian Shepherdson, chief US economist at Pantheon Macroeconomics said in a research note sent to clients.