The consumer price index (CPI) rose 0.2% in April, following a 0.1% decrease in March, and now stands at a 2.3% year-over-year increase. Despite moderation in food prices, the sector of full-service restaurants continued to rise due to increased demand.
Energy prices saw a 0.7% increase, largely driven by sharp natural gas price hikes. The core CPI, which strips out volatile components, rose 0.2% and stands at a 2.8% year-over-year gain.
Goods prices moderated, with retailers discounting existing inventories to bolster cash cushions ahead of tariffs. New and used vehicle prices remained subdued but inventories depleted due to consumer front-running. Large appliances and furniture prices increased due to tariffs in place prior to the April announcement.
The recent move to roll back tariffs on China has triggered a rush to get orders out of warehouses abroad during the 90-day pause. However, those who did not store goods abroad face challenges. Shipping costs surge, putting upward pressure on costs. Margins are thin for retailers and small businesses, with sentiment dropping again in April.
Service sector prices remain elevated, driven by gains in medical costs, airfares declining due to economy fares, but admissions to sporting events tumbled. Vehicle repairs and insurance increased due to tariff-related parts rising in cost.
The PCE index, the Federal Reserve’s favored inflation measure, is expected to rise 0.1% in April, suggesting a moderation in inflation. However, this may be the last benign inflation report for a while as tariffs continue to impact prices. The Fed will remain cautious until it gains more clarity on how much inflation tariffs will trigger. Recession risks have increased due to the sharp increase in effective tariff rates and global economic uncertainty.
Source: https://kpmg.com/us/en/articles/2025/april-2025-cpi.html