Consumer Price Index:Historical Releases/2023 March

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Full Report: https://www.bls.gov/news.release/pdf/cpi.pdf

Publishing date: April 2023

Summary

Percent changes in CPI

Headline CPI rose 0.1 percent in March on a seasonally adjusted basis, after increasing 0.4 percent in February. Over the last 12 months, the all items index increased 5.0 percent before seasonal adjustment.

Core CPI rose 0.4 percent in March, after rising 0.5 percent in February, year over year increase was 5.6%.

Biggest Contributors:

The index for shelter was by far the largest contributor to the monthly CPI. This more than offset a decline in the energy index, which decreased 3.5 percent over the month as all major energy component indexes declined.

Indexes which increased in March include shelter, transportation, motor vehicle insurance, airline fares, household furnishings and operations, and new vehicles. The index for medical care and the index for used cars and trucks were among those that decreased over the month.

Super Core CPI Contributions

Categories watched by the FED:

• Core goods: 1.5% YoY (0.2% m/m)
• Core Services: 7.1% YoY (0.4% m/m)

• Shelter: 8.2% YoY (0.6% m/m)

• Services less shelter "super-core": 5.7% YoY (0.3% m/m)

CPI expectations

February 2023 CPI is expected to continue on its downward trend, recent developments are in line with the expectations.Headline CPI will have very high comps in 2021 when the war started, which is one of the reasons from the headline to decline even below core prices.

However, core CPI, is expected to increase Y/Y compare to February, and to be higher than the headline CPI number. Sign of the stickines of the core inflation.

We think the numbers will still be very high for the FED to fell comfortable to change its plan, especially since their focus is on the core numbers.

Some developments during the month: (more details: Consumer Price Index)

• Wages are still increasing but a more moderate pace, 4.2% in march down from 4.6% in January. The labor market remains still tight.
• Energy prices had a small decline in March. In contrary, gasoline prices increase a bit.
• Food prices continue to decline, marking a 20% Y/Y decline.
• Supply chain has normalized, falling even below the index’s historical average in March
• Housing prices continue to decline m/m.
• Used Car prices increase again 1.5% in March. CPI data could start reflecting the increases seeing since January.

Despite the banking developments, the markets are still pricing another rate hike in May.

Range:

• CPI: 5% - 5.4%
• Core CPI: 5.5% - 5.7%

Escenario	Market reaction	Probability by Magaly
If < 5%	3% rally	5%
Between 5.0% - 5.1%	1-2% Rally	35%
In line with expectations 5.2%	Flat	40%
Between 5.3% - 5.4%	1-2% drop	15%
if > 5.4%	4% drop	5%

Consensus forecast

Variable	Forecast	Previous	Actual	Market Reaction
Core CPI (YoY) (Mar)	5.60%	5.50%
Core CPI (MoM) (Mar)	0.40%	0.50%
CPI (MoM) (Mar)	0.20%	0.40%
CPI (YoY) (Mar)	5.20%	6.00%

FED Cleveland Forecast

	YoY Change		MoM Change
Month	CPI	Core CPI	CPI	Core CPI
Mar-23	5.22	5.66	0.3	0.45
Apr-23	5.31	5.64	0.5	0.46

• Specific institutions forecast

Institution	Forecast
BARCLAYS	5.10%
BLOOMBERG	5.10%
HSBC	5.10%
MORGAN STANLEY	5.10%
TD SECURITIES	5.10%
UBS	5.10%
WELLS FARGO	5.10%
GOLDMAN SACHS	5.10%
GURGAVIN CAPITAL	5.10%
NOMURA	5.10%
CIBC	5.20%
CITI	5.20%
JP MORGAN	5.20%
BMO	5.20%
BANK OF AMERICA	5.20%
VISA	5.40%
MEDIAN	5.10%

Commentary

Commerzbank

“Statisticians are likely to report a drop in the inflation rate from 6.0% in February to 5.3% in March. However, the March decline is entirely due to the fact that prices are now being compared with those in March 2022, when energy prices in particular had already risen significantly due to the Ukraine war. Indications of the underlying trend are more likely to be provided by the core rate, which excludes the volatile prices for energy and food. Here we expect an increase from 5.5% to 5.7%. The MoM rates also show that inflation is hardly calming down. Compared with February, prices across all goods and services probably rose by 0.3%, excluding energy and food by as much as 0.5%.”

ING

“Markets are increasingly doubtful that the Fed will be able to hike rates much further, but that could yet change after the upcoming CPI report. Another 0.4% MoM figure on core CPI, more than double the rate required over time to take the US back to the 2% YoY inflation rate target, could nudge expectations for the upcoming FOMC meeting higher. We still think the Fed would prefer to raise rates at least once more should financial conditions allow, but we see a strong probability that it reverses course and cuts rates by 100 bps later in the year as ever-tighter lending conditions, high borrowing costs, weak business sentiment and a deteriorating housing market all weigh on growth and rapidly dampen price pressures.”

TDS

“Core prices likely cooled off modestly in March, with the index still rising a strong 0.4% MoM, as we look for recent relief from goods deflation to turn into inflation this month. Shelter prices likely remained the key wildcard, while slowing gas prices and softer food-price gains will likely dent non-core inflation. Our MoM forecasts imply 5.1%/5.6% YoY for total/core prices.”

NBF

“The energy component may have had a negative impact on the headline index as prices likely fell in both the gasoline and natural gas segment. Expected gains for shelter and used vehicles could still result in a 0.2% monthly increase in headline prices. The core index, for its part, could have increased 0.4% MoM, which would translate into a one-tenth increase in the annual rate to 5.6%.”

CIBC

“Core CPI likely decelerated to 0.4% MoM, in line with flagging consumer demand as excess savings have dwindled and the labor market has slowed, but that’s still too hot of a pace to achieve on-target inflation. Although private measures of used car prices have increased recently, the weight of that component in the CPI index has fallen sharply, and other measures of goods prices, including the PPI for finished core consumer goods, suggest that pressure in core goods prices could have been limited. Adding food and energy prices back into the mix likely showed more modest price pressures of 0.2% MoM for the total CPI, as prices at the pump fell in seasonally-adjusted terms. We’re nearly in line with the consensus expectation, which should limit market reaction.”

Wells Fargo

“After rising 0.4% in February, we look for the CPI to moderate to a 0.2% gain in March. With the initial surge in oil/gasoline prices stemming from Russia’s invasion of Ukraine a full year behind us, CPI when measured on a year-over-year basis should fall to 5.1% in March from 6.0% in February. However, another elevated reading in the core CPI is likely to indicate that the recent trend in inflation is little improved. Excluding food and energy, we look for the CPI to rise 0.4% and remain close to 5% on a three-month annualized basis. A further slowdown in core inflation is likely coming as the year progresses, but we doubt it will be evident in this CPI release.”

Citi

“We expect an increase in core CPI in March that is on the border between 0.4% and 0.5% MoM, but at 0.456% the forecast would again round to 0.5% MoM with risks tilted towards the upside for most components though with modest downside risks for the largest subcomponent of shelter prices. Most forecasts over the next few months will likely be factoring in a gradual slowing in shelter prices that has long been expected (a large one-month drop is possible, but unlikely).”