US inflation gauge cools with little sign of tariff impact, so far
[May 31, 2025] By
CHRISTOPHER RUGABER
WASHINGTON (AP) — A key U.S. inflation gauge slowed last month as
President Donald Trump’s tariffs have yet to noticeably push up prices.
Spending by Americans slowed despite rising incomes, potentially an
early reaction to higher prices on some imported goods.
Friday’s 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. Excluding 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. Economists
track core prices because they typically provide a better read on where
inflation is headed.
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 they were
struck down late Wednesday in court.
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.
The big increase in durable goods prices could reflect the early impact
of tariffs. Americans also cut back their spending on longer-lasting
factory goods in April, the report showed.
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, said 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.”
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A shopper surveys goods on display in a Costco warehouse Wednesday,
May 21, 2025, in Lone Tree, Colo. (AP Photo/David Zalubowski)
 Walmart executives said earlier this
month that the retail giant would increase prices for many products
in May and June to account for the tariffs, while electronics chain
Best Buy's CEO Corie Barry said Thursday the company is increasing
some prices as well because of the duties, as a “last resort.”
Makeup company E.l.f. Beauty, which sources 75% of its products from
China, said earlier this week it would raise its prices by $1 a
product starting Aug. 1 to offset the cost of tariffs.
And on Thursday, warehouse retailer Costco said it has already
raised prices for some products, but has held the line on others.
The company largely absorbed the duties on pineapples and bananas
“because they are key staple items” and “we felt it was important to
really eliminate the impact there,” said Gary Millerchip, Costco's
chief financial officer.
But the company did increase prices for flowers from Central and
Source America, for example, “because we felt that was something
that the member would be able to absorb," Millerchip added.
At the same time, incomes — before adjusting for inflation — rose a
healthy 0.8% in April. Much of that gain reflected an increase in
Social Security benefits for some retired teachers, fire fighters,
and federal workers whose incomes previously weren't fully counted
toward Social Security benefits.
The inflation-fighters at the Federal Reserve said at their most
recent meeting May 6-7 that inflation is still elevated, compared to
their target of 2%. Fed officials, who focus more on core prices,
broadly support keeping their key interest rate steady while they
evaluate the impact of the tariffs on inflation and jobs.
The court ruling last Wednesday said that most of Trump’s tariffs
were unlawful, including his duties on imports from Canada, Mexico,
and China, as well as those on more than 50 other countries. Tariffs
on steel, aluminum, and cars were implemented under different laws
and remain in place.
But the duties were allowed to remain in effect while the Trump
administration appeals the ruling against them. And administration
officials say they will find other legal authorities, if needed, to
implement the tariffs. As a result, what tariffs will end up in
place and for how long remains highly uncertain.
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