Surprise drop in US March CPI
The most widely-followed measure of the cost of living in the States took economists by surprise in March, falling back sharply amid an unusually synchronised drop in many categories, albeit mirroring inflation outturns in China and Europe, economists said.
Consumer prices retreated by 0.3% last month in comparison to February - their first decline in a year - dragging the annualised rate of gains from 2.7% to 2.4%, according to the Bureau of Labour Statistics.
Even excluding the often volatile energy and food categories, the so-called 'core' CPI dipped by 0.1% on the month, to stand 2.0% above the year-earlier level.
"Altogether, the underwhelming US March inflation data mirror other soft inflation outturns in China and Europe."
"[...] While several of the declines in March appear outsized and are likely to be reversed, the boost to headline inflation from rising energy prices is largely complete and further progress towards the Fed’s inflation mandate will have to come from domestic price pressures. That process is likely to take time and could be uneven," economists at Barclays Research wrote in a note sent to clients immediately following the data.
Economists had forecast headline CPI ran at 2.6% year-on-year in March, while core CPI was seen edging higher from 2.2% for February to 2.3% in March.
Prices for commodities less food and energy dropped 0.3% against February, those for new vhicles by 0.3%, used cars and trucks were 0.9% cheaper and the cost of apparel fell 0.7%.
Services prices exclduing energy also slipped, slipping 0.1%, with prices for wireless telephone services falling by an outsized 6.5% on the month - their largest fall since 1997.
Barclays attributed that drop to intense competition in the sector.
Prices for shelter were also weak, rising by 0.1% on the month, roughly two tenths of a percentage less than the average rise observed over at least the past six months, as the cost of lodging away from home decreased by 2.4%.
However, prices of primary residences and owners equivalent rent were up by 0.3% and 0.2%, respectively, in-line with their recent trends, Barclays pointed out.
Commenting on the March CPI data, Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: "This is a remarkable coincidence of sharp drops in prices and it is posssible that Easter seasonal adjustment problems played some role, though we can't find any consistent evidence of distortions at this time of year. One very soft month does not make a new trend, though, so we will be looking for a clear rebound in April. Another month like March, though, and a June rate hike will become much less likely."