Shelter inflation boosts US CPI in April

Danske Research Team Danske Bank A/S

Overview: Realized April inflation landed close to expectations in the euro area but surprised to the topside in the US. That said, the war in Iran has so far had limited impact on underlying inflation across both economies. The rise in energy prices points to a further increase in US and euro headline inflation over the coming months with a lagged pass-through to core inflation as well. China is moving from a deflationary to inflationary force.

Inflation expectations: Euro area’s 1-year inflation expectations have jumped to about 4.0%, but longer-term forward expectations remain well anchored. Survey based inflation expectations have ticked higher across both euro area and the US.

US: April CPI surprised to the upside in both headline (3.8% y/y, cons. 3.7%, March 3.3%) and core terms (2.8% y/y, cons. 2.7%, March 2.6%). The uptick was driven largely by an unexpected uptick in rental and OER prices, which rose at the fastest combined monthly pace since September 2023. In contrast, market-based measures of rental inflation have cooled in early 2026. Energy inflation landed close to expectations, while core goods prices were little changed in m/m terms. Food inflation accelerated driven especially by higher beef prices.

Euro area: HICP inflation rose to 3.0% y/y in April from 2.6% in March. The increase was mainly driven by energy inflation, which surged to 10.8% y/y. In contrast, core inflation eased slightly to 2.2% y/y suggesting limited spill-over effects from the Iran war so far. The EC’s April business survey highlighted a historic spike in selling price expectations within the industrial sector, marking the largest monthly increase in the survey’s 25-year history, yet we remain below 2022 levels. Price expectations in services rose much less.

China: PPI inflation increased again in April to 2.8% y/y from 0.5% y/y. Commodity prices suggest PPI is heading towards 7% y/y over the summer. It also points to higher export price inflation and China is set to move from a deflationary force to inflationary force. CPI inflation increased from 1.1% y/y to 1.2% y/y.

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Danske Research Team

Danske Bank A/S

Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.

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