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Airfares Roughly Half The Surprise In Core CPI

  • Core CPI inflation surprisingly increased from 0.32% to 0.57% M/M in April, back to rates from January.
  • Some of this had largely been expected, with used cars nearly unwinding the -0.2pp drag from March, whilst shelter saw an uplift from a larger re-acceleration in primary rents than expected.
  • Strip those out and core CPI inflation excluding shelter and used cars (the two major drivers over the past year) accelerated back to joint post-pandemic highs from January of +0.7% M/M.
  • However, this still includes airfares, which surprisingly jumped from 10.7% to 18.6% M/M, with the change accounting for ~0.06pps of the 0.25pps increase in core inflation but perhaps closer to 0.1pp of the 0.17pp beat on consensus.
  • New cars were also slightly higher than most analysts estimates seen beforehand, adding 0.05pp to the change in core but probably marginally less than that for the surprise.
  • With numerous large single item moves, the Cleveland Fed median measure of inflation will be particularly interesting when released later for a better gauge of inflation breadth.

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