Two-Sided Surprises Mostly Net Out For CPI

Core CPI at 0.41% M/M was close to the revised higher consensus of 0.4 (had been 0.3 yesterday with risks tilted higher). It came with almost offsetting surprises, especially with upside from used cars that is unlikely to repeat again and the downside focused in typically more volatile items.

Upside Surprise Comes From Used Cars and Medical Care Services

• Used cars & trucks 4.45% M/M after -0.88% M/M (analysts saw increasing 1-4%)
• New vehicles -0.22% M/M after +0.4% (analysts saw some slowing)
• Heavily weighted medical care services also of note, with deflation moderating from -0.50% to -0.14% M/M, helped by the strongest professional category since Oct (+0.11% M/M) and strongest hospital services since Jan (+0.43% M/M) – these latter two having a better feed through to PCE medical components.

Downside Surprise Factors From Volatile Travel Items:

• Lodging away from home -2.96% M/M after +2.7% (analysts saw flat to +/-1pp)
• Airfares -2.55% M/M after 4.0% (analysts ranged from -2% to +2%) – PPI data relevant for PCE.