CPI lands the day after PPI inflation for a change, with markets closely watching for continued persistence after 2024 started with three stronger-than-expected releases
EXECUTIVE SUMMARY
- Consensus puts core CPI inflation at 0.3% M/M in April after a surprisingly strong Q1 averaging 0.37% M/M.
- Two potential drivers in April are idiosyncratic to CPI and won’t impact PCE, potentially limiting the market impact to surprises in supercore CPI in particular this month.
- i) Analysts are tightly grouped around core CPI at 0.3%, with the moderation from March driven mainly by softer but still very strong estimates for vehicle insurance after its third-strongest print in fifty years.
- ii) A health insurance reset isn’t expected to have a significant impact although surprises could have a large impact on supercore CPI (but again, not PCE).
- PPI unusually lands the day before CPI, meaning more accurate post-CPI estimates for core PCE.
- A 0.30 core CPI print would see the three-month ease from a particularly strong 4.5% back to 4.15% annualized, although the six-month would accelerate two tenths to 4.06% annualized for its third month above the Y/Y.
- An upside surprise will dial up concerns that the Q1 acceleration wasn’t just a bump and could see 2Y Treasury yields eye 5% again, with the start point to Fed cuts pushed further out amidst a still high bar to a rate hike.
- A downside surprise would still see sensitivity but the onus is on multiple low inflation readings before cut expectations are meaningfully brought nearer.
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