CPI Continues Downward Trend

CPI Continues Downward Trend

Consumer inflation rose 0.4% in April per the Consumer Price Index (CPI), with this headline reading coming in line with estimates. On an annual basis, CPI fell from 5% in March to 4.9% last month. Core CPI, which strips out volatile food and energy prices, increased by 0.4% while the annual reading fell from 5.6% to 5.5%.

In addition, the shelter index increased 8.1% over the last year, accounting for 43.2% of the total increase in all items less food and energy per the Bureau of Labor Statistics. However, shelter costs have been declining in more real-time data. For example, Apartment List’s latest Rent Report showed that year-over-year rent growth decelerated to 1.7% in April, the lowest level since March 2021. Once these moderating shelter costs are reflected in the CPI data, they will add additional downside pressure to inflation.

Prices have come down across the board for food, gas, clothing, etc. – all these are reflected in CPI.

Shelter costs (39% of core CPI), although decelerating, are still showing increases in CPI due to the lag effect.

What’s the bottom line? While annual inflation remains elevated at 4.9%, it has declined sharply from the 9.1% peak seen last June. Lower inflation helps both Mortgage Bonds and mortgage rates improve, so these signs of easing inflation are welcome.

Resource: MBS Highway a paid subscription