On Tuesday (May 13), we may see what could arguably be the calm before a stormy sea of inflation driven by volatile tariffs.
The Consumer Price Index inflation reading from the Bureau of Labor Statistics is estimated by economists and a broad range of financial media sites to come in at 0.2% and translate to an annualized pace of 2.5%. The April showing would reverse a decline notched in March. The annual inflation rate was 2.4% with the March report baked in; the read-across will be that inflation may tick up a bit.
It’s the granular details that matter. Beyond the headline number, digging into the various expense categories will give insight into where the pressures lie and where they could mount. The past several CPI reports have shown that everyday essentials — especially shelter and food — are still getting more expensive.
The shelter and food metrics have also been showing stickier price increases than the overall headline number. For example, in March, the food at home index, which is a proxy for groceries, surged by 0.5%. Shelter rose 0.2%, and at an annual rate of 4% remains one of the areas where prices are rising the most.
PYMNTS Intelligence has estimated that essential spending eats away at more than 70% of one’s paycheck. The PYMNTS Intelligence report “Struggling Consumers Go to Short-Term Strategies to Manage Higher Expenses” found rents have been creeping up, a phenomenon cited by half of the individuals surveyed.
April’s data will take into account only a few weeks of tariff impact, and price hikes may not be showing up fully yet. Many merchants have cited passing increased costs along to consumers as a strategy that may be inevitable.
Ahead of April’s “Liberation Day,” the PYMNTS Intelligence report “Data Book: Tariffs Drive Price Pressures as SMBs Weigh Supply Chain Overhauls” found that 26% of small- to medium-sized businesses (SMBs) see higher prices as a response to tariffs, but only 9% said that they would use that strategy as a first line of defense. Still, the longer trade wars and tariff uncertainty wind on, the more widespread the price increases would become.
“Today’s consumers are also more leveraged,” PYMNTS CEO Karen Webster wrote in February, as revolving debt continued to hit new highs.
The latest Federal Reserve data, released Wednesday (May 7), underscored that debt paydowns ahead of the tariffs were likely only temporary. In March, consumers padded their debt loads —in auto loans and other nonrevolving loans that tend to be for large-ticket items — for goods that were likely to get more expensive once import duties surged. Overall credit got a 2.4% annualized bump year over year, the fastest pace seen in several months. Revolving debt, which includes credit cards, was 1.7% higher.
Data on consumer spending from Fiserv showed that spending has been shifting to essential goods and services, including healthcare and grocery categories. Discretionary spending, such as at restaurants, is slower, especially in the face of price hikes.
“An increasingly budget-conscious consumer continues to show up most when dining out,” Fiserv said. “Compared to 2024, average ticket sizes are down significantly (-7.8%) despite total transactions being up (+9.6%).”
Block’s earnings results also included commentary that consumers have been skewing their purchases into essential categories such as grocery and gas.
