Citibank 1/7: US #CPI strong on transitory components & solid shelter prices
Citi analysts take – the strong increase in March US core CPI released overnight is in line with upside surprises expected in the coming months as a number of components normalize.
Citi analysts take – the strong increase in March US core CPI released overnight is in line with upside surprises expected in the coming months as a number of components normalize.
Citibank 2/7: Key shelter prices in CPI however show signs of potential earlier-than-expected firming with another solid increase in owners’ equivalent rent (OER), the key shelter price component of consumer price inflation and the largest share of CPI.
Citibank 3/7: Overall, US core CPI in March rises 0.339%MoM, stronger than consensus for 0.2%. Meanwhile core CPI YoY rises to 1.6% and headline CPI gains 0.6%MoM on strength in energy (+5%) and food (up a modest 0.1%).
Citibank 4/7: Above-average strength in core CPI is partly led by transitory components and will likely be looked through by #Fed – this leads US Treasury yields & USD to somewhat counter-intuitively move lower in the minutes following the overnight release.
Citibank 5/7: But the most important part of March CPI is another solid increase in owners’ equivalent rent (OER), the key shelter price component of consumer price inflation and the largest share of CPI. While the 0.23% increase is slightly more modest than 0.27% in February,
Citi 6/7: if anything over last few months, Citi analysts see signs that shelter prices have started to firm a few months earlier than prev expected. Citi analysts expect OER to increase at a pace similar to March over next 2-3m, with even firmer price increases into year-end.
Citibank 7/7: Based on elements of CPI and PPI, Citi analysts expect a 0.30%MoM increase in core PCE inflation in March, with the year-on-year reading rising to 1.8%. US core PCE remains well on track to overshoot 2% next month in April.
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