Moderate CPI in April, Energy Will Push It Up in May
- The Consumer Price Index for April increased by 0.2 percent.
- Initial Claims for Unemployment Insurance were unchanged for the week ending May 5, at 211,000.
The headline Consumer Price Index increased by 0.2 percent in April, about as expected, following a cooler-than-expected PPI report for April issued yesterday. Low energy prices held the CPI back in March. That reversed in April with the CPI’s energy price sub-index up by 1.4 percent for the month. With recent gains in crude oil prices through early May, we expect to see even more pressure on the CPI from energy in May. According to AAA, the national average price for regular gasoline is up to $2.84 today, 22 percent higher than the $2.34 price from a year ago. As a general rule, every 1 cent increase in the price of gasoline absorbs about $1 billion in consumer spending over the course of a year. So as gasoline prices increase, we start to look at discretionary consumer spending categories, such as restaurants and hotels, for signs of stress. Food prices also warmed up in April, with that sub-index gaining 0.3 percent for the month. Excluding food and energy, core CPI was subdued, increasing by just 0.1 percent in April. The 12-month trend for the headline CPI is still moving up. Headline CPI was up 2.5 percent in April, over the previous 12 months. The year-over-year gain in the headline CPI was as low as 1.6 percent last June. The year-over-year gain in core CPI was 2.1 percent in April, the same as for March.
Labor market indicators continue to look good. Initial claims for unemployment insurance for the week ending May 5 were unchanged, holding at 211,000. The four-week moving average of initial claims eased by 5,500, to 216,000, the lowest reading since December 1969. That number is even more remarkable when you consider that the size of the U.S. labor force now is approximately twice what it was in 1969. Continuing claims increased by 30,000 for the week ending April 28, to hit 1,790,000, a very low number.
Market Reaction: U.S. equity markets opened with gains. The 10-Year Treasury bond yield is down to 2.96 percent. NYMEX crude oil is down to $70.81/barrel. Natural gas futures are up to $2.78/mmbtu.
For a PDF version of this report click here: CPI-051018.
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