Again lower than expected! The U.S. April CPI increased by 2.3% year-on-year, tariffs "pressured" have not taken effect but undercurrents are surging?

According to the Zhitong Finance APP, influenced by stable clothing and new car prices, the U.S. CPI increase in April was lower than expected, indicating that the urgency for companies to pass on higher tariff costs to consumers is not high at the moment. Data released by the U.S. Bureau of Labor Statistics on Tuesday showed that excluding the volatile food and energy categories, the core Consumer Price Index (CPI) rose 0.2% month-on-month in April and 2.8% year-on-year, in line with expectations and unchanged from the previous month, marking the lowest increase since February 2021. The overall CPI rose 0.2% month-on-month and climbed 2.3% year-on-year, remaining below expectations for three consecutive months.

The CPI report indicated a decline in airfares and hotel prices, suggesting a weakening demand for non-essential services. Prices for used cars, trucks, and clothing also decreased. Grocery prices fell for the first time in a year, with egg prices experiencing the largest drop since 1984.

New car prices remained stable and did not rise as expected due to tariff increases. However, prices for most imported goods, such as furniture and appliances, surged significantly.

Despite widespread expectations that the Trump administration's tariff policies would drive up inflation, companies may still be digesting large inventories and have not yet reached a point where they must raise prices. Many tariffs have been reduced, including those imposed on Chinese goods after the truce in the U.S.-China trade war, but U.S. importers still face high trade costs and are concerned that tariffs may be raised again after the suspension period ends.

Following a temporary agreement reached between the U.S. and China over the weekend, the 90-day tariff reduction measures will lower the total tariffs on most Chinese imports from 145% to 30%, suggesting that future price increases may be more moderate. However, according to Bloomberg Economics analysis, if companies concentrate on bulk purchasing to replenish inventories, leading to port congestion, it could actually drive the CPI up more quickly.

After the data release, U.S. Treasury prices continued to rise, the dollar fell, and S&P futures narrowed their early losses.

Given the significant uncertainty regarding the future direction of tariff policies and their ultimate impact on the economy, the Federal Reserve is expected to maintain interest rates unchanged for the foreseeable future. Many economists believe that the temporary easing of U.S.-China trade tariffs has reduced the risk of a U.S. economic recession, but tariffs will still keep inflation levels well above the Federal Reserve's target.

Companies from Nintendo Co. to Procter & Gamble (PG.US) have indicated that they will attempt to pass on tariff costs to consumers. However, it remains unclear how strong companies' pricing power will be as demand slows. U.S. retail sales data, set to be released on Thursday, is expected to show that consumer spending on goods remained basically flat in April, primarily reflecting the state of goods consumption.

In terms of service costs, while attention has been focused on the impact of tariffs on goods prices, a key factor driving inflation in recent years has been housing costs, which account for the largest share of service expenditures Driven by rising rents, housing prices increased by 0.3%