Updated from 8:41 a.m.
A surprising report on consumer prices in April may make a clear understanding of the inflation picture a bit harder to achieve in the short term, as aspects of the report defied recent trends.
The government Friday reported that overall prices rose 0.2%, less than the 0.3% forecast and down from March's rate of 0.5%. But the core rate, excluding food and energy prices, rose 0.3%, above economists' consensus expectation of 0.2% and slightly less than the 0.4% increase in March.
"I'm baffled by this number totally. It doesn't make any sense," said Paul Mendelsohn, chief investment strategist at Windham Financial. "To have the core number higher than the headline, and to have gasoline prices actually falling, doesn't make any sense to me and I don't think it makes any sense to the market either."
Housing and medical costs lead gains, as both rose 0.4%, while energy costs inched up 0.1%, following a 1.9% jump the previous month and a 5.6% rise in the past 12 months. Over the past 12 months, prices are up 2.3%. Excluding energy and food, the rate is 1.8%.
"Something is not right here," Mendelsohn added. "Just look at what gasoline prices have done in the last two weeks alone. They're up over 6%. Just look at what you're seeing at gas pumps, and what you're feeling, and you have to think that the number doesn't include the price jumps because they came so late in the month -- that's a possibility -- but it just doesn't square with what you're seeing out there, or with yesterday's PPI numbers."
The CPI report follows a somewhat troubling report on producer prices Thursday that showed wholesale costs rose a larger-than-expected 0.7% in April, following a 0.5% increase the prior month. But excluding food and energy costs -- which are volatile on a monthly basis -- prices rose 0.2% last month, slightly less than economists' forecasts and the same rate as March's prices. Still, on a 12-month basis, the index is up 1.4%, the fastest pace since September 2001.
The pickup in inflation this year is most noticeable in the energy sector. Both crude oil and gasoline futures recently hit record highs on the New York Mercantile Exchange, and consumers are now paying more than $2 a gallon at the gas pump in California and other states.
The CPI increased 0.3% or more in each of the first three months of this year, with energy prices up more than 1.5% in all of those months.
April's PPI report showed overall energy prices rose 1.8% for intermediate goods and 6.3% for unadjusted crude goods.