The core CPI ex-food, energy & shelter fell for the third consecutive month in April (-0.05% m/m). The 3m/3m annualised rate tumbled to 0.41%. In the context of April’s strong payroll numbers – and last week’s rebound in job openings – the Phillips curve appears almost horizontal.
To be sure, some elements of the core CPI showed signs of turning up. The jump in the y/y rate for other recreation services was of particular note.
The annual rate for the new vehicles CPI also rose at the fastest pace since June 2015. It is a good lead for the used cars and trucks CPI. This also points to a rebound in real personal consumption expenditures for motor vehicles & parts, which was a big drag on consumer spending in Q1
Nevertheless, some items in the CPI with large weights are heading in the opposite direction. Of particular note was the 2.96% y/y slide in apparel prices, the biggest fall since May 2003.
This may be a harbinger of things to come: fully automated assembly lines are now being installed in textile manufacturing plants in the US. The cost of production for each T-shirt could plunge from an estimated 33 cents to 5 cents as robots are integrated into the production process.
