Tariffmageddon Canceled: U.S. Inflation Stays Cooler Than Expected, Prices Up 2.3%, Smallest Annual Increase Since February 2021
U.S. inflation edged up in April, less than forecast, defying predictions that tariffs would push prices up at a faster rate.
The consumer price index rose 0.2 compared with the previous month, the Department of Labor said Tuesday. Economists had forecast a 0.3 percent increase following a 0.1 percent decline in March.
Compared with a year ago, consumer prices are up 2.3 percent. That is the lowest inflation reading since February of 2021.
Core prices, a measure that excludes food and energy prices, rose 0.2 percent compared with March. Over the past 12 months, core prices are up 2.8 percent.
Economists had forecast core prices to rise 0.3 percent, up from a 0.1 percent decline reported in March. This is the third consecutive month in which analysts had overestimated month-to-month inflation.
The April CPI report is the first since President Donald Trump announced tariff hikes on April 2’s Liberation Day. Some higher tariffs on China, however, have been in effect since February. Many economists had been expecting tariffs would push up consumer prices in April but the report indicates this has not happened.
Energy prices, including energy services, are down 3.7 percent compared with a year ago despite climbing 0.7 percent in April. Energy commodities are down 11.7 percent and declined another 0.2 percent in April. Gasoline prices have fallen 11.8 percent over the past year and declined 0.1 percent in April.
New car prices, which were expected to be hit by tariffs, were flat for the month. Used car prices fell by 0.5 percent. Compared with a year ago, new car prices are up 0.3 percent and used car prices are up 1.5 percent.
Apparel prices fell 0.2 percent and are down 0.7 percent from a year ago. Grocery prices fell 0.4 percent in the month and are up two percent over the past 12 months. Restaurant prices, however, climbed 0.4 percent and are up 3.7 percent over the year.
Egg prices, which have been closely watched as a politically potent symbol of inflation, fell 12.7 percent in April, the biggest decline since 1984,
Prices of toys, games, hobbies, and playground equipment—a category with a lot of imported goods—fell 0.3 percent after declining 0.6 percent in the previous month. Compared with a year ago, toy prices are down 1.3 percent.
Prices of smartphones fell 0.6 percent and are down 14.6 percent compared with a year ago.
Prices of furniture and appliances, which are largely imported, increased.
Services inflation accelerated in April, rising 0.3 percent after March’s 0.1 percent increase. Shelter prices rose 0.3 percent, including a 0.4 percent increase in rents and the same increase in a measure called owners’ equivalent of rent, which is intended to capture the cost of homeownership. Compared with a year ago, rent is up four percent and owners’ equivalent of rent is up 4.3 percent.
This suggests that the source of inflation in the economy is not tariffs but domestic demand for U.S. housing and services continuing to rise faster than supply.
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