NEW YORK: US consumer prices probably picked up in April after the smallest advance in nine months, foreshadowing a broader acceleration as many companies seek to pass on higher tariffs.
A closely watched gauge of prices paid by Americans for goods and services, excluding volatile food and energy costs, is forecast to have risen 0.3%, based on a Bloomberg survey of economists.
In March, the so-called core consumer price index inched up just 0.1%.
While today’s report is likely to show limited pass-through so far of higher US duties on imported goods, many economists anticipate the impact becoming more pronounced over time.
That helps explain growing apprehension among consumers about inflation specifically and the economy and job market more broadly.
Retail sales due on Thursday are expected to show some of that anxiety, after a healthy 1.5% jump at the end of the first quarter, and economists forecast little change in April sales as front-loaded demand for motor vehicles cooled.
For their part, companies are threading the needle between attempting to mitigate the costs of tariffs through price hikes, and trying to guard against a drop in sales as consumers recoil from sticker shock.
With the Trump administration having temporarily dialed back certain tariffs while working to reach country-specific trade deals, some businesses may hold off on price increases.
US officials held talks with China over the weekend in Switzerland, with Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer saying that “substantial progress” was made.
“Why is consumer price inflation so moderate even though the costs of tariffs have been borne mostly by the United States side? We think it’s because retail sales demand is slowing, and retailers are finding it difficult to pass on higher prices without suffering a sharp drop in demand, though they’ll still try.
“If that effect prevails, then the net impact of tariffs will be less inflationary than commonly thought,” said economist Anna Wong.
At the same time, recent surveys of manufacturers and service providers show rising input costs that may force their hand on price adjustments.
The government’s April producer price index on Thursday will shed light on evolving wholesale cost pressures.
After keeping interest rates unchanged on May 7, US Federal Reserve policymakers said there’s a greater risk that trade policy will lead to both higher inflation and rising unemployment.
The inflation and retail sales reports headline a busy week for US economic data. In addition to weekly jobless claims, traders will pay attention to the University on Michigan’s preliminary May consumer sentiment survey, which will include inflation expectations. — Bloomberg
