- Prior was 8.5% y/y
- m/m reading +0.3% vs +0.2% expected and 1.2% prior
Core CPI:
- y/y +6.2% vs 6.0% expected and 6.5% prior
- m/m +0.6% vs 0.4% expected and 0.3% prior
Details (month over month)
- CPI energy -2.7% vs +11.0% prior
- Gasoline -6.1% vs +18.3% prior
- New vehicles +1.1% vs +0.2% prior
- Used vehicles -0.4% vs -3.8% m/m prior
- Owners' equivalent rent +0.5%m/m vs +0.4% prior
- Food +0.9% vs +1.0% prior
- Real earnings % vs -1.1% prior
This is a pivotal report. The basic strategy is to buy risk trades on a higher-than-expected number and sell them on a lower-than-expected number but the market sometimes finds a way to burn everyone in an environment like this, so be careful.
The chart above tells the story. We're in the process of rolling over from extremely high y/y inflation but the shape of that curve is in question. Will it be a swift return to 2% inflation or a long, slow process?
Many were forecasting a faster fall in used car prices after a 22.7% y/y gain through April but they retreated just 0.4% in the month. In May so far we're also seeing record US gasoline and diesel prices along with another spike in natural gas. That puts some fresh inflation into the pipeline.
US 2-year yields jumped to 2.84% from 2.62% initially in very low liquidity but have pared back to 2.72%.
What stands out in the details is food. The prices of groceries at home have risen 1.4%, 1.5% and 1.0% m/m sequentially for four months and up 10.8% y/y. That's accelerating and the highest since November 1980.