Highlights
Consumer price inflation in April was tame at the headline level but the core rate unexpectedly jumped. The headline CPI came in flat, following a 0.1 percent decline in March and matching the market forecast. A 2.4 percent drop in energy costs kept the overall CPI weak. Meanwhile, core CPI inflation posted a 0.3 percent jump in April, after rising 0.2 percent the month before. But according to the Labor Department, over 40 percent of the gain in the core rate was due to a second consecutive hike in tobacco taxes. Apparently, states are trying to make up lost revenue with these taxes. The consensus had expected a 0.1 percent uptick for the core.

The 2.4 percent drop in energy costs was led by a 2.8 percent fall in gasoline prices in April. While prices have been rising at the pump, they have been less than expected by seasonal factors. Heating oil dipped 2.1 percent while piped gas and electricity declined 2.2 percent. Food prices decreased 0.2 percent in the latest month.

Other notable components included a 0.4 percent surge in medical care costs and a 0.4 percent drop in recreation prices.

Year-on-year, headline inflation slipped to down 0.6 percent (seasonally adjusted) in March from down 0.4 percent in March. On a year-ago basis, overall CPI inflation is at its weakest since 1955. Meanwhile, the core rate firmed to up 1.9 percent from up 1.8 percent the prior month.

Inflation is still a little firm at the core level but not as bad as at face value due to the tobacco taxes. Nonetheless, if energy picks up strength, overall inflation is at risk of picking of steam.

Market Consensus before announcement
The consumer price index declined 0.1 percent in March, following a 0.4 percent gain the month before. The deceleration in the headline CPI was led by a 3.0 percent dip in energy costs, following a 3.3 percent jump the month before. Gasoline fell 4.0 percent in the latest month. Meanwhile, core CPI inflation remained steady at 0.2 percent. Looking ahead, we will likely see a rebound in the headline number but a softer core rate for April. Higher energy costs probably will boost overall CPI inflation. For March, the core index was softened by declines in lodging away from home, used cars and trucks, and in apparel prices. These are likely to continue in April due to weak demand. Finally, in March there was a monthly 11.0 percent surge in prices for tobacco & smoking products due to higher taxes and this will not be repeated in April.

2009 Release Schedule

Released On: 1/16 2/20 3/18 4/15 5/15 6/17 7/15 8/14 9/16 10/15 11/18 12/16 Release For: Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov