The April consumer price index will provide insight in the early days of the current trade conflict when it is released Wednesday as signs of rising prices for apparel, autos, shoes and toys begin to appear.
But one industry that will observe a sharp price hike is used autos. The Manheim used vehicle value index for April, released last week, increased by 4.9% annually.
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Given the strong probability that the 25% tax on auto imports will stay in place, higher used car prices will be part of the inflation narrative going forward.
Used auto and trucks account for 2.4% of the weighting inside the CPI, while transportation accounts for 16.6%.
While some businesses hiked prices in advance of the tariffs, we do not expect to see the full impact of the new trade taxes to appear until the May, June and July inflation data.
In fact, with aggregate demand slowing, we think that retailers are most likely finding it difficult to pass along price hikes, so April inflation should remain restrained.
We are forecasting a 0.3% monthly increase in the top-line and core indices of the April CPI and a 2.4% and 2.8% rise, respectively, from a year ago.
