All eyes will be on the U.S. economy Tuesday.
Consumer Price Index (CPI), a key measure of inflation, is expected to have decelerated 0.7% in April, down further from a decline of 0.4% in March, according to economists polled by Bloomberg. Excluding volatile food and energy, CPI likely fell 0.2%, down from a 0.1% decrease in the prior month.
“A big drop in energy prices pushed the headline CPI index sharply lower, but crippled demand for a range of discretionary goods and services is pushing core inflation lower too,” Capital Economics Chief U.S. Economist Michael Pearce wrote in a note May 8.
Things are all over the place, Wells Fargo economists said.
“The factors that influence prices are all over the place. In the service sector and in manufacturing, purchasing managers are reporting some of the longest wait times on record for supplier deliveries, as the crisis is making it impossible to get some of the things they need. Ordinarily that scarcity would push up prices,” the firm explained. “Yet at the same time, many commodity prices are falling as worries about a collapse in demand weigh on the outlook.”
Credit Suisse’s James Sweeney pointed out that inflation is not the main concern in the near term for policy makers as the focus is on the rapidly deteriorating labor market and growth due to widespread shutdowns across the U.S.
“Although the YoY readings in CPI are likely to continue falling, we do expect April to mark the trough in monthly inflation and prices should start to rise gradually as states reopen,” Sweeney said.
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Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.
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