The U.S. Consumer Price Index (CPI) was virtually unchanged in April month over month. Larger-thanexpected declines in food and energy prices were partially offset by a second consecutive sizeable jump in the tobacco index. Increases in medical care costs and newvehicle prices, as well as an upturn in lodging away from home, contributed to push the CPI ex food and energy up on the month. Year over year, instead, while the all-items CPI was down 0.7%, core CPI was up 1.9%. Even excluding the tobacco effect, core CPI would still have advanced roughly 1.7%.
Alternative measures of underlying inflation were showing some dispersion in April. This is quite evident when annualized month-over-month rates of change are compared. On that basis, the median CPI rose 2.1% against only 0.9% for the 16% trimmed-mean CPI, which is far below the 3.1% registered by the conventional core CPI. Many studies suggest that the trimmed-mean measure is a better indicator of the underlying-inflation trend. Currently, it is certainly showing a pattern consistent with what would be expected in the context of a U.S. economy that slipped into recession 17 months ago.
