Americans got some relief from inflation last month, but top forecasters say the effects of the trade war aren’t yet being reflected in the data, and the coming months could see a fresh spike in prices.
The consumer price index cooled unexpectedly in April, with the overall inflation rate dipping to 2.3% year-over-year, down from 2.4% in March.
But consumers might be navigating another bout of inflation in the coming months.
For one, the data is backward-looking and takes time to appear in official statistics. Firms, meanwhile, appeared to stockpile inventory in the first quarter to avoid tariff-related costs. Advanced imports of consumer goods surged as much as nearly 30% during the quarter, Morgan Stanley said.
Morgan Stanley US Economics Research
“This number doesn’t matter, because the tariff effects are really going to start to show up in next month’s number,” Ellen Zentner, the chief economist strategist at Morgan Stanley’s Wealth Management division, told CNBC on Tuesday after the CPI report. Higher numbers in next month’s CPI data imply that prices will start to increase for consumers as soon as this month.
Rick Rieder, the chief investment officer of global fixed income at BlackRock, said he believed the inflationary impact from tariffs would “escalate” in the summer months. At the moment, there’s little evidence to suggest tariffs have affected inflation, besides a slight increase in auto prices, he wrote on Tuesday.
John Kerschner, the head of US securitized products and a portfolio manager at Janus Henderson, also said he believes inflationary pressures from tariffs could show up starting in June.
“Thus, the market will wait with bated breath for those readings to make a determination of where we actually stand on tariff-induced rising prices,” he wrote in a note.
Wharton professor Jeremy Siegel speculated that price increases could come over the next several months.
“Again, I don’t think we’re going to be seeing the effects of this tariff until, you know, maybe June or July. Because so little actually did come into this country and then get priced at the retail level and then sampled by the government officials to get in,” Siegel told CNBC prior to the CPI report.
Banks have adjusted their forecasts for inflation and economic growth after the US struck a deal with China to lower tariffs for 90 days, but many on Wall Street are still anticipating higher inflation by the end of the year.
Goldman Sachs estimated that core Personal Consumption Expenditures inflation, the Fed’s preferred inflation measure, could rise from 2.6% annually in March to 3.6% by the end of the year.
“Our forecast reflects a sharp acceleration in most core goods categories,” the bank wrote in a note, adding that it believes tariffs would cause the “most acute” price increases in consumer electronics, autos, and apparel.
“There was maybe a hint of tariffs in the data as a few line items with significant imports-household furnishings, medicinal drugs, IT commodities, and toys-saw price increases accelerate this month. But we continue to expect clearer evidence in the months ahead,” Bank of America analysts wrote following the CPI release.
Economists have warned that tariffs could stoke inflation for Americans, as companies could pass on tariff-related costs to consumers.
The average effective US tariff rate will likely end up somewhere around 17%, the Yale Budget Lab estimated this month. That’s lower than previous forecasts, but still the highest average tariff rate the US has seen in more than 80 years, Siegel said.
