Inflation cools down! US CPI in April stood at 2.3% YoY, the lowest level since February 2021

In April, the US Consumer Price Index (CPI) increased by 2.3% YoY, marking the third consecutive month of slower-than-expected growth and reaching its lowest level since February 2021. Despite this, the impact of tariffs has yet to fully materialize, and businesses may be digesting inventories.

On Tuesday, May 13, the US Bureau of Labor Statistics released the April CPI data:

• CPI increased by 2.3% YoY (expected: 2.4%, previous: 2.4%);
• CPI increased by 0.2% MoM (expected: 0.3%, previous: -0.4%);

• Core CPI increased by 2.8% YoY, the slowest pace since the inflation surge in spring 2021 (expected: 2.8%, previous: 2.8%);
• Core CPI increased by 0.2% MoM (expected: 0.3%, previous: 0.1%).

From a structural perspective,goods prices have just returned to the inflation zone (up 0.1% YoY), while services inflation continues to decline.However, core services inflation increased on a MoM basis.

Breaking it down further,the so-called "supercore CPI" (services excluding housing) fell to 3.01% YoY, the lowest level since December 2021.

Housing costs remain a key driver of inflation, while food prices have declined significantly.

According to the CPI report,housing costs once again accounted for more than half of the increase, with the index rising by 0.3% in April.Despite a sharp decline in oil prices, the energy index still increased by 0.7%, primarily due to rising natural gas and electricity costs.

Among other common inflation expectations, motor vehicle insurance increased by 0.6% MoM and 6.4% YoY in April.

The household furnishings and operations index increased by 1%. However, prices for major imported goods such as furniture and appliances have risen.

Airline tickets, used cars, and clothing prices have declined.Airline ticket prices were among the biggest decliners, falling by 2.8% from March, possibly reflecting the demand slowdown that airline executives have been warning about. Overall clothing prices fell by 0.2%, with men's shirts and sweaters dropping by 2.8%.

Food prices fell by 0.1%, with food at home (groceries) declining by 0.4%, the largest drop since September 2020.Items contributing to the decline included meat/poultry/fish and eggs, breakfast cereal, rice, and bakery products. Among these, egg prices recorded their largest decline since 1984. Recently, an avian influenza outbreak in the US has caused egg prices to surge. The decline in frozen fruits and vegetables was the largest on record, with a 3% drop in the month.

New car prices remained unchanged, which differed from the previously anticipated price increases due to tariff impacts.

Traders continued to bet that the US Fed would cut interest rates twice by the end of 2025.

Tariff Shadow: Potential Risks Amid Short-Term Calm

Although the Trump administration's tariff policies were widely expected to drive up inflation, companies may still be digesting large inventories and have not yet started to raise prices across the board.

According to the Ministry of Commerce, China and the US each canceled additional tariffs totaling 91% and suspended the implementation of 24% retaliatory tariffs. However, US importers still face high trade costs and are concerned that tariffs may rise again after the suspension period ends.

Analysts believe that this 90-day grace period may imply that price increases will be relatively mild. However, according to Bloomberg research, if congestion occurs at ports during the restocking period, it could actually lead to a faster rise in CPI.

Ali Jaffery of CIBC Capital Markets warned that even if the tariff policy is suspended, it may still affect prices in a timely manner:

"Tariffs are unlikely to have a significant impact this month, as it is the first month of the government's global tariff regime. Companies also have ways to remain patient with healthy inventories and high profit margins.

Current tariff levels are still a significant step up from where they were before, and there may be some pass-through, although it may be spread out over a longer period."

Brian Coulton, chief economist at Fitch Ratings, believes that core inflation is currently at its best:

"Core goods prices have not yet reflected the impact of tariff hikes since February, while service inflation continues to ease gradually. The retrospective three-month core inflation rate has fallen below 3%. However, service inflation still looks quite stubborn, and car prices have started to rise again.

As inventories of imported goods before the tariff hikes are depleted, core goods inflation may rebound in the coming months."

Market Reaction

Following the data release, the US dollar index fell by about 10 points in the short term and is now at 101.45;

US stock futures rose in the short term, with the Nasdaq 100 index futures up 0.4%; the yield on the 10-year US Treasury note fell in the short term and is now at 4.455%; spot gold showed relatively little fluctuation in the short term and is now at $3,240 per ounce.