Deutsche_Bank-US_Economic_Notes_March_CPI_recap_Calm_before_the_tariff_s...-114638462_11页_864kb

US Economic Notes Summary: March CPI and Inflation Outlook

Core Content

The March 2025 Consumer Price Index (CPI) data showed a significant slowdown in inflation compared to expectations, with both headline and core CPI figures coming in much softer than anticipated. This suggests a potential easing in price pressures across the economy, although the long-term implications of recent tariff policies remain a key concern.

Key Findings

CPI Data Overview

• Headline CPI: Decreased by -0.05% compared to +0.22% in February.
• Core CPI: Increased by +0.06% compared to +0.23% in February.
• Year-over-Year Rates:
  • Headline CPI fell to 2.4% (down 0.4 percentage points from February).
  • Core CPI dropped to 2.8% (down 0.3 percentage points from February).
• Shorter-term Trends:
  • Three- and six-month annualized core CPI changes fell to 3.0% (down 0.6 percentage points from previous levels).

Breakdown of CPI Components

• Core Goods Prices: Declined by 0.1% (vs. +0.22% in February), indicating no immediate price pressure from early tariff impacts.
• Core Services Prices: Increased by +0.06% (vs. +0.23% in February), but this was largely offset by significant declines in lodging away and airfares.
  • Lodging Away: Declined by 3.5%.
  • Airfares: Declined by 5.3%.
• Trimmed Mean and Median CPI:
  • Trimmed mean CPI increased by +0.21% (vs. +0.27% in February).
  • Median CPI increased by +0.34% (vs. +0.29% in February).
  • Both fell slightly year-over-year, with trimmed mean at 2.99% and median at 3.48%.

Supercore Services

• Supercore services prices declined by 24bps (vs. +0.22% in February), marking the largest decline since May 2020.
• This decline is attributed to the significant drops in lodging and airfares.

Rents

• Primary Rent: Increased to +0.33% (vs. +0.28%).
• Owners' Equivalent Rent: Increased to +0.40% (vs. +0.28%).
• Seasonal factors are influencing these increases, but leading indicators suggest rental disinflation is still in effect.

Near-term Outlook

• Tariff Policy Risk: The biggest risk to the near-term economic outlook remains the impact of ongoing and potential future tariff actions.
• Impact on Growth: If tariffs remain in place, they could reduce GDP growth by 1 - 1.5 percentage points, increasing recession risks.
• Impact on Inflation: Tariffs could also add a similar amount to core PCE inflation.
• Fed Response: The Federal Reserve is expected to "look through" the price level effects, but distinguishing between tariff-driven and organic inflation pressures in real time is challenging.
• Inflation Expectations: There is concern that inflation expectations may not be reliably anchored, complicating the Fed's response.

Core PCE Forecast

• Core PCE: Estimated at +0.15% for March, consistent with a year-over-year rate of 2.6%.
• This is down from 2.8% in February, primarily due to the weaker performance of airfares in CPI, which do not feed into core PCE as directly as food away from home.

Future Risks and Monitoring

• Auto Tariffs: The 25% auto tariffs could begin to lift vehicle prices in late Q2 or early Q3, potentially affecting used car and truck prices.
• Monitoring Areas:
  • Continued price trends in lodging away and airfares.
  • Potential impact of tariffs on core goods prices.
  • Changes in consumer behavior and demand.

Analysts and Contact Information

• Analysts:
  • Justin Weidner
  • Brett Ryan
  • Matthew Luzzetti
  • Amy Yang
• Contact Details:
  • Justin Weidner: +1-212-469-1679
  • Brett Ryan: +1-212-250-6294
  • Matthew Luzzetti: +1-212-250-6161
  • Amy Yang: +1-212-454-9893

Important Disclosures

• The views expressed in this report reflect the personal opinions of the analysts.
• Prices and data are sourced from public and reliable sources, but no guarantees of accuracy or completeness are made.
• Deutsche Bank and its affiliates may hold securities of the companies mentioned.
• The report is not an investment recommendation and does not consider individual investor circumstances.
• It is intended for professional and sophisticated investors only.

Regulatory Information

• The report is subject to various regional regulations and is distributed accordingly.
• It is not directed to retail investors or specific accounts.
• Full disclosures and disclaimers are available on the Deutsche Bank website.