US Inflation Anticipated to Rise in April, With Limited Effect from Tariffs

US inflation is anticipated to increase in April, bouncing back from an unexpected slowdown in the previous month, with the impact of higher tariffs on Chinese imports beginning to affect prices.

According to the median forecast from a Bloomberg survey of economists, the consumer price index (CPI) is expected to rise by 0.3% from March, after a decline the previous month. Similarly, a core metric that excludes volatile food and energy prices is projected to advance at a comparable rate. Many analysts predict that the Bureau of Labor Statistics' report on Tuesday will reflect the initial effects of the significant tariffs imposed on Chinese goods last month, alongside other tariffs. However, the overall impact may be limited since many products available in the US last month were imported before the new tariffs took effect.

"CPI categories heavily reliant on imports from China— such as toys, shoes, and apparel—may experience slight inflation," noted Bloomberg Economics forecasters led by Anna Wong in a report on Monday. "Retailers are struggling to pass on higher prices without risking a sharp decline in demand, although they will attempt to do so. If this trend continues, the overall effect of tariffs may be less inflationary than anticipated."

Looking ahead, forecasters are evaluating the recent US-China agreement to temporarily reduce tariffs on each other's goods, which could create a "catch-up period." During this time, retailers may rush to replenish inventories, leading to shortages on US shelves that might drive consumer price growth, according to Bloomberg Economics.

Economists at Bank of America estimate that goods inflation, not including food and energy, rose by 0.1% in April following a decline the month before. "Tariffs are expected to provide a modest boost to goods prices this month, but more significant increases are on the horizon," Stephen Juneau and Jeseo Park noted last week, prior to the announcement of the 90-day trade agreement. They also predicted rising car prices, partly due to increased demand driven by expectations of higher costs from tariffs.

Other economists believe the effects of the new tariffs were limited. Julien Lafargue, chief market strategist at Barclays Private Bank, stated in a note on Monday that the CPI report would likely be "largely unaffected" by tariffs announced by President Donald Trump on April 2. This is attributed to exemptions for goods already en route to the US, as well as a rush from consumers and businesses to purchase products earlier in the year to avoid tariffs. "Both the Fed and global investors will need to remain patient before they can fully evaluate the impact of trade uncertainties on consumer prices," Lafargue added. In the grocery sector, economists from Morgan Stanley and Pantheon Macroeconomics highlighted a significant drop in egg prices, a major contributor to food inflation in CPI data this year through March, likely due to a decrease in bird flu cases.

Economists at Citigroup Inc. reported that travel-related categories, including airfares and car rentals, saw price declines for another month. The sustained price weakness observed in March, along with a further downturn in April, suggests a decrease in travel demand, according to economists Veronica Clark and Andrew Hollenhorst. The shelter category, which encompasses rents and is the largest component of the index, is expected to cool off following a significant increase in March.