The Federal Reserve's preferred inflation gauge, the core Personal Consumption Expenditures (PCE) index, showed that price increases slowed in April. But as Numerator chief economist Leo Feler explains in the video above, the data may be too backward-looking to excite Wall Street.
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This PCE report that came out today, it's backward looking. It's looking at what happened in April, right? And so, in April, that's still way too early for uh any of the tariffs to have had any kind of meaningful impact uh on uh consumer price inflation. What we expect uh is that as firms deplete the inventories that they built up and and we also saw that firms built up a lot of inventory in January, February, and March. Um it's really going to be uh as those inventories are depleted, as firms are starting to bring in uh additional goods coming in from abroad. That's when the tariffs are likely to start having an impact. And so we're really thinking about uh perhaps later in June, July, August and on things that are going to be uh produced uh abroad. You have to think about things are going to be like back-to-school shopping, backpacks, apparel, computers. Um those are the the the items that would really start uh showing some kind of inflationary impact and
as you said, I think the Fed is right to look through these current numbers because they're talking about what could have been the case. You know, had it not been for these trade wars, had it not been for some of the policy uncertainty. Um and they're really waiting to see whether or not there will be this uptick in inflation going forward so that they don't make the same mistake again uh of thinking that, you know, there might be a temporary inflation shock, transitory inflation, that turns out to be much more persistent as we had uh in 2021 and 2022.
