Inflation in the US decelerated more than expected in April, drawing a bright, red line under the deflationary impulse from COVID-19.
Headline CPI dropped 0.8% MoM, double March's sequential drop, but in line with expectations. That is the largest monthly decline since December 2008.
Year-on-year, the headline gauge rose just 0.3% in April, less than the expected 0.4% print. Core rose 1.4%, versus an expected 1.7% gain.
There's no mystery here. In the near-term, the deflationary side of the virus and attendant lockdown protocols will overwhelm any upside price impact from supply shocks in certain sectors.
The 20.6% drop in the gasoline index in April contributed the most to the monthly decrease in the all items index, but as the BLS notes, indexes for apparel, motor vehicle insurance, airline fares, and lodging away from home all fell sharply too.
Those drops were more than enough to overwhelm rises in the food gauges, where the index for food at home logged its biggest monthly increase since February 1974.
The MoM print for core CPI was -0.4%. That is double the consensus estimate and the largest monthly drop in series history.
This comes in the wake of March's -0.1%
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