Inflation Resilience Reappears: Signs of Tariff Impact Emerging, US April CPI Expected to Rebound

The Zhitong Finance APP noted that inflation in the United States may accelerate in April, following an unexpected cooling in the previous month, especially as tariffs on Chinese goods begin to impact prices. According to the median forecast derived from a survey of economists, the Consumer Price Index (CPI) is expected to rise by 0.3% compared to March, after a decline in the previous month. The core measure, which excludes the more volatile food and energy categories, is also expected to rise at a similar pace according to widespread predictions. Most forecasters indicated that the report released by the U.S. Bureau of Labor Statistics on Tuesday will show the preliminary effects of the punitive tariffs imposed last month on China and other countries. The impact may be limited, as many imported goods on U.S. shelves last month arrived before the new tariffs took effect. U.S. inflation in April is expected to accelerate Economists Anna Wong and others wrote in a report on Monday, "CPI categories that are heavily reliant on imports from China, such as toys, footwear, and clothing, may experience mild inflation. Retailers find it difficult to pass on price increases without causing a significant drop in demand—though they will still attempt to do so. If this effect prevails, the net impact of the tariffs will not be as inflationary as commonly believed." Looking ahead, forecasters are still assessing the recently reached temporary agreement between the U.S. and China to lower tariffs on each other's products. Bloomberg Economics wrote that this could lead to a "catch-up period," where retailers rush to replenish inventory amid a scarcity of goods on U.S. shelves, potentially driving up consumer prices. Bank of America economists estimate that inflation for goods excluding food and energy rose by 0.1% in April, following a decline in the previous month. Stephen Juneau and Jeseo Park wrote last week, "Tariffs should slightly push up goods prices this month, but larger increases are still to come." In this category, they expect car prices to rise, "partly because anticipated tariffs will lead to price increases, releasing demand early." Other economists expect the impact of additional tariffs to be limited. Barclays Private Bank Chief Market Strategist Julien Lafargue stated in a report on Monday that the CPI report is expected to be "largely unaffected" by the tariffs announced by President Trump on April 2. This is because goods already en route to the U.S. were exempted, and consumers and businesses rushed to purchase products earlier this year to avoid tariffs. Lafargue stated, "The Federal Reserve and global investors still need a bit more patience to accurately assess the impact of trade uncertainty on consumer prices." In terms of groceries, economists from Morgan Stanley and Pantheon Macroeconomics noted that egg prices have significantly decreased—this was a key driver of food inflation in the March CPI data. A reduction in avian flu cases may provide some relief Weakness in the Service Sector Economists and policymakers are closely monitoring certain categories of services that serve as a barometer for changes in discretionary spending. Economists at Citigroup reported that prices in travel-related categories, such as airline tickets and car rentals, have declined for the second consecutive month. Economists Veronica Clark and Andrew Hollenhorst noted that the price weakness reported in March, along with further declines in April, supports the view of weak travel demand. The housing category—including rent, which is by far the largest category in the index—is expected to cool off after a significant increase in March. Samuel Tombs and Oliver Allen, macroeconomists at Pantheon Macroeconomics, wrote in a report on Monday: "Looking ahead, we remain skeptical that tariffs will prevent service sector inflation from continuing to gradually fade, allowing the Federal Reserve to ease policy again in the second half of this year."