US inflation unexpectedly decreased in April, defying predictions that tariffs would accelerate price increases.
The Labor Department reported a 0.2% increase in the consumer price index compared to the previous month, while economists had anticipated a rise of 0.3% following a 0.1% drop in March.
Year-over-year, consumer prices have risen by 2.3%, marking the lowest inflation rate since February 2021.
Core prices, excluding food and energy, also rose by 0.2% from March, and have increased by 2.8% over the last year.
Predictions had forecasted a 0.3% increase in core prices, following a 0.1% decline in March. This marks the third month in a row where analysts have overestimated inflation.
This CPI report is notable as it follows President Trump’s announcement of tariff increases on April 2nd. However, certain high tariffs on China had already been in place since February. Many economists believed these tariffs would drive prices higher in April, but the data indicates they did not.
Energy prices, including services, fell by 3.7% year-over-year, despite a 0.7% rise in April. Specifically, energy products dropped by 11.7% over the last year, with a 0.2% decrease in April. Gasoline prices decreased by 11.8% annually, with a slight 0.1% dip in April.
New car prices remained stable for the month, contrary to expectations. Used car prices fell by 0.5%, while new cars have risen by 0.3% and used cars by 1.5% over the past year.
Apparel prices went down by 0.2%, seeing a 0.7% decline from last year. Grocery prices fell by 0.4% during the month but are up 2% over the last year. On the other hand, restaurant prices increased by 0.4%, reflecting a 3.7% annual rise.
Egg prices, often seen as a barometer for inflation, plummeted by 12.7% in April, the largest reduction since 1984.
Prices for toys, games, and hobbies—categories with significant imports—rose by 0.3% after dropping 0.6% the previous month. However, these prices are down 1.3% compared to last year.
Smartphone prices decreased by 0.6%, with a notable 14.6% drop from the previous year.
In contrast, prices for mostly imported furniture and appliances have increased.
Service inflation gained momentum in April, climbing by 0.3% after a 0.1% rise in March. Shelter prices also increased by 0.3%, reflecting a 0.4% rise in rent and the same for owner-equivalent rent, which helps gauge homeownership costs. Year-over-year, rents are up by 4%, parallel to the increase in owner-equivalent rent.
This trend indicates that domestic demand for housing and services in the U.S. is growing faster than the available supply, suggesting that this isn’t the primary source of inflation in the economy.
