On April 12, the US Department of labor released CPI data for March: CPI was 8.5% year-on-year and expected to be 8.4%; Core CPI was 6.5% year-on-year and 6.6% expected; The quarter on quarter CPI is 1.2% month on month and is expected to be 1.2%; Core CPI was 0.3% month on month (MOM) and expected to be 0.5%.
In terms of year-on-year growth, the US CPI increased by 8.5% in March, continuing to hit a new high since 1982, an increase of 0.6 percentage points over the previous month. Among them, the core CPI increased by 6.5%, an increase of 0.1 percentage points over the previous month (the growth rate of rent increased from 4.8% to 5.1%), but it was lower than the market expectation of 6.6%; The growth rate of energy prices rose to 32.0% from 25.6% last month, and the growth rate of food prices rose to 8.8% from 7.9%. Their year-on-year driving effects on CPI increased by 0.5 and 0.1 percentage points respectively.
In terms of month on month growth, the US CPI increased by 1.2% in March, the highest since October 2005, an increase of 0.4 percentage points over the previous month. Among them, the core CPI increased by 0.3%, down 0.2 percentage points from the previous month (the growth rate of rent price decreased slightly by 0.1 percentage point to 0.5%, and the decline of second-hand car price expanded from 0.2% to 3.8%), which was lower than the market expectation of 0.5%; Food prices increased by 1.0%, unchanged from the previous month; The growth rate of energy prices rose to 11.0% from 3.5% last month, and the pulling effect on CPI was 0.9 percentage points month on month.
Overall, the year-on-year and month on month growth rate of CPI in March increased significantly, mainly reflecting the impact of the rise in international crude oil prices after the outbreak of the conflict between Russia and Ukraine. In that month, the spot price of WTI crude oil once rose above US $110 / barrel, with a cumulative increase of 4.8%. In response to the rise in oil prices, on March 31, the Biden government announced the release of 1 million barrels of strategic oil reserves (SPR) per day in the next six months. On April 1, the IEA announced that Member States had reached an agreement on the release of oil reserves again. The easing of supply concerns prompted the decline of oil prices, which is expected to weaken the driving effect on CPI in April.
In March, the core CPI increased slightly year-on-year and the growth rate fell month on month, both of which were lower than market expectations, indicating a slowdown in inflation. In the core CPI, the year-on-year growth rate of used car prices narrowed and the month on month decline expanded, which is consistent with the trend of Mannheim used car value index in the same period, which has fallen for two consecutive months; The month on month growth rate of rent prices fell slightly, but still maintained rapid growth, which may continue to restrict the subsequent decline of inflation.
In March, US consumer inflation expectations rose significantly. The inflation expectation reading of the University of Michigan was 5.4%, up 0.5 percentage points month on month, the highest since 1982; The results of the New York Fed consumer expectation survey showed that the median one-year inflation expectation rose from 6.0% to 6.6%, another record high; The expected median change in house prices in the next year will rise from 5.7% to 6.0%, much higher than the 3.0% in February 2020; Rent growth is expected to rise to 10.2% in the next year, and food prices are expected to rise by 9.6%.
In the context of sustained high inflation, the Federal Reserve announced a 25bp interest rate hike in March, mainly considering the short-term impact of the Russian Ukrainian conflict on the US economy. In view of the great disturbance to US inflation caused by the conflict between Russia and Ukraine, items such as rent may continue to restrict the subsequent decline of inflation, and consumer inflation expectations have increased significantly. In order to curb inflation as soon as possible, we expect the Federal Reserve to raise interest rates by 50bp in May and announce the reduction of the table.
Risk tip: the geopolitical situation exceeded expectations, and the tightening of the Federal Reserve exceeded expectations.
