This morning’s consumer-price index dropped with a sigh of economic relief — and a dash of anxiety.
Prices rose 2.3 percent in April compared to a year ago, according to the Department of Labor. Economists were predicting prices to rise by 2.4 percent.
April’s reading is great news for grocery shoppers: it’s the lowest price hike reading for US consumers since 2021.
The news sent US stock index futures higher on Tuesday, as investors increased expectations that the Federal Reserve was on track to lower borrowing costs this year.
Wall Street’s moves are following a record-setting trading day. Minutes after the inflation report hit the wires, Dow futures were down 0.28 percent, S&P 500 futures rose 0.13 percent, and Nasdaq futures were up 0.33 percent.
‘The introduction of sweeping new tariffs on imports into the US roiled markets in April,’ Nicholas Hyett, an investment manager at Wealth Club, said.
‘That’s a relief for investors and borrowers – who have feared that tariffs could cause a spike in prices preventing the Federal Reserve from cutting interest rates to support the economy.’
But dig a little deeper, and the economic picture gets murkier. Month-over-month, prices ticked up 0.2 percent, both for the overall index and the core reading.
The latest CPI numbers came in as Trump visits Saudi Arabia
And consumer advocates are worried that prices are about to rise even more. April’s inflation report is the first to capture some economic whiplash from President Donald Trump’s April 2 ‘Liberation Day’ tariff blitz.
But they don’t capture the full effects of a potential tariff-induced supply chain shortage or price hikes to cover the import taxes.
Americans have been confronting inflation since the rate peaked over nine percent in 2022.
The readings come as the Trump administration announces a blitz of foreign policy moves that could catalize economic changes in the US.
President Trump landed in Saudi Arabia on Tuesday, the first leg of his three-nation visit to the Middle East this week.
He is hoping to tackle multiple inflationary conflicts across the region, including violent tensions in Gaza, the West Bank, the Red Sea, Gulf of Aden, Pakistan, and India.
Trump is also hoping to announce major investments from the Saudi’s into American manufacturing. He might also get a new plane.
Yesterday, the Trump administration also announced an agreement to cut its sky-high tariff rate on China for the next 90 days.
April’s tariff report is the first since President Trump’s ‘Liberation Day’
Shoppers have been dealing with sky-high inflation since 2022
Shoppers saw prices increase just 2.3 percent in April compared to the same month 2024
The price of groceries rose by 2.8 percent in April
Both countries said they’re negotiating to set a comparatively moderate import tax rate. The US had imposed 145 percent taxes on most products shipped from China.
All of these tensions could still force Americans to pay more money for popular consumer goods.
America’s new Chinese import tax regime still carries significant costs for American consumers, including a new 30 percent import tax on most goods.
‘The problem is that all the chopping and changing on tariffs means the picture is not at all clear,’ Hyett added.
Other investors agreed.
‘We’re not ready to call it a turning point,’ Lale Akoner, a global market analyst at eToro said.
‘Housing costs remained stubbornly high, and super-core services (excluding shelter) climbed. These are the sticky components that the Fed watches closely, and they’re not giving up ground easily.’
Despite this morning’s good news in the markets, consumer advocates are still worried what the tariff pauses will mean for shoppers.
Before the tariff pullbacks, consumer sentiment had been dropping like a stone.
The bad vibes forced markets into contraction: and many pointed the finger at President Trump’s trade policies.
Historically, tariffs have been used as a defensive measure to help protect growing domestic industries.
President Trump’s attempts to levy the taxes as either a negotiating tactic or a manufacturing accelerant were completely new approach that frightened markets.
Stocks dropped precipitiously after his policy unveil event.
