US: Downside surprise from March CPI numbers - Nomura

Analysts at Nomura note that March CPI numbers of US surprised on the downside, declining by 0.3% m-o-m (Nomura: -0.047%; Consensus: 0.0%).

Key Quotes

“Non-core components were broadly in line with our expectations. Energy prices were down 3.2% m-o-m, but food prices increased steadily by 0.3% m-o-m. A big surprise is the first decline in core CPI since January 2010. Core CPI fell by 0.1% (0.122%) m-o-m, which translates into a two-tenths decline in its year-on-year change rate to 2.0% from 2.2%.”

“Although some transitory factors such as a decline in wireless telephone services exaggerated the weakness, the March CPI report increases uncertainty around the inflation outlook. Given the core PCE price index is estimated using CPI and PPI data, we think core PCE inflation for March will not be as weak as core CPI inflation, but incoming information suggests a slight 0.03% m-o-m decline in core PCE inflation in March, which leads to a 1.7% (1.651%) y-o-y rise in core PCE price index, one-tenth lower than 1.8% (1.753%) the prior month.”