Tariff-related cost increases have not yet reached households, as the headline consumer price index inched up in April. The CPI for all items rose 0.2% for the month, which brought the annual inflation rate to 2.3%, according to a Marcus & Millichap research brief about trade policy impacts. Core CPI, which excludes food and energy costs, remained unchanged at 2.8% year-over-year.
Underlying price pressures were relatively stable during the month and the 90-day reprieve on U.S.-China tariffs interrupted the escalation of trade tensions, said Marcus & Millichap. However, in-place duties are likely to spike inflation over the coming months, and rising business input costs could accelerate consumer price growth.
The input cost trend is reflected in the ISM Manufacturing Prices Paid Index, which rose in April to its highest level since June 2022. This signals production cost increases across the supply chain, which the report primarily attributed to increasing raw material costs.
“Historically, movements in this index have preceded shifts in consumer inflation, but the extent of pass-through will depend on the strength of consumer demand,” Marcus & Millichap said. “With household budgets already strained and consumer confidence weakening, retailers may encounter heightened resistance to price increases.”
This could lead to elevated financial pressure in the manufacturing and logistics sectors, leading to softer demand for big-box industrial space and reduced development activity, the firm warned.
Many companies pulled inventory forward in anticipation of tariffs earlier this year, which may provide a temporary price buffer. However, when inventory cycles turn over, cost pressures are likely to return.
One of the more volatile components of the CPI is utility costs, which increased 1.5% in April. A sustained increase in utility costs is putting pressure on both multifamily tenants and landlords, particularly in mid-market and lower-income properties, according to the report. Owners are typically hesitant to pass through utility charges to price-sensitive tenants, which can affect a property’s operating income. However, in the face of rising utility costs, Marcus & Millichap predicts landlords may be more inclined to invest in efficiency upgrades or shift utility costs to renters where possible.
New vehicle prices were mostly stable in April, suggesting inventory levels and pricing dynamics have yet to experience any significant disruption.
“Even so, the 25% tariffs on imported auto parts, steel and aluminum may generate additional pressure on automakers and suppliers,” said the report. “Many manufacturers are expected to adopt a wait-and-see approach, as trade-related uncertainty continues to delay capital investment.”
Reshoring and onshoring strategies could gain traction over time in the automotive sector, but much depends on future policy developments and expectations, said the report.
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