If the shifting U.S. tariff policies are having any effect on inflation or prices, it doesn’t appear to be showing yet.
In fact, a key gauge used to track inflation slowed last month, as did spending by American consumers despite rising incomes.
A report from the Commerce Department showed that consumer prices rose just 2.1% in April, compared with a year earlier, down from 2.3% in March and the lowest since September.
Taking out the volatile food and energy categories, core prices rose 2.5% from a year earlier, below the March figure of 2.7%, and the lowest in more than four years, according to a report from The Associated Press.
The figures show inflation is still declining from its post-pandemic spike, which reached the highest level in four decades in July 2022. Economists and some business executives have warned that prices will likely head higher as Trump’s widespread tariffs take effect, though the timing and impact of those duties are now in doubt after the administration lost some court battles, the AP reported.
On a monthly basis, overall prices and core prices both increased just 0.1% from March to April. The cost of big-ticket manufactured goods rose a hefty 0.5%, though that increase was offset by a 0.1 decline in other goods, such as groceries. The cost of services rose just 0.1% from March to April, according to the AP report.
Overall consumer spending – which includes spending on services – rose 0.2% in April from March, the report said, but that’s down from a big 0.7% rise in March.
The slowdown in spending could reflect some early caution on the part of consumers, economists said, in response to higher goods prices. It also suggests that some of the spending jump in March reflected consumers purchasing items like cars to get in front of the impact of tariffs.
“The pulling forward of consumer spending ahead of the tariff increases will continue to dampen household spending in the coming months, especially as they face higher prices and a softening labor market,” Kathy Bostjancic, chief economist at Nationwide, told the AP in an email. “We anticipate that the improved inflation trend will reverse in the second half of the year as companies are forced to begin passing along a portion of the increased tariffs in order to protect profit margins.”
