Wednesday’s US inflation data is something of curate’s egg.
Here, via Reuters, are the headlines:
U.S. APRIL CPI -0.1 PCT -0.0689; CONSENSUS +0.1), EXFOOD/ENERGY UNCH (+0.0471; CONS +0.1 PCT)
U.S. APRIL CPI YEAR-OVER-YEAR +2.2 PCT (CONS +2.4 PCT), EXFOOD/ENERGY +0.9 PCT (CONS +1.0 PCT)
U.S. APRIL CPI ENERGY -1.4 PCT, GASOLINE -2.4 PCT, NEW VEHICLES UNCH
U.S. APRIL CPI FOOD +0.2 PCT, HOUSING -0.1 PCT
And from the Bureau of Labor Statistics release.
On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers (CPI-U) declined 0.1 percent in April, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the index increased 2.2 percent before seasonal adjustment.
The index for energy decreased 1.4 percent in April and accounted for the seasonally adjusted decline in the all items index. The indexes for gasoline and natural gas both decreased significantly, outweighing increases in the indexes for fuel oil and electricity.
So, the good news is that there is nothing in today’s data to stop the pro-growth Fed extending its ‘extended period’ language. The bad news is that the minus reading will awaken fears of deflation.
But when the two are balanced out, RBS’s Alan Ruskin reckons there’s nothing much to worry about here.
Nonetheless taken collectively, I think the Fed will not be too perturbed being in the position they are in, in part because other inflation indicators like PPI pipeline numbers are not nearly as quiescent, and the CPI data is being suppressed by housing (down 0.1% in April, and -0.6% y/y) that has such a huge (42%) weight in the index. All of the above considered, I would still regard the above data as positive for risk, not least because of the bullish Fed implications.
But Europe, of course, is a rather different matter.
Plainly, the focus is on EUR machinations, where I can’t believe there will be another political action to throw fuel on the fire, even if the peace may last days rather than weeks. As such, risk will remain very choppy, but odds of an immediate follow through from the latest risk downdraft are not obvious, now that yesterday’s German ‘clanger’ looks to have been absorbed.