The May Consumer Price Index (CPI) report, set to be released on Wednesday, is expected to show an acceleration in price increases. This comes amid ongoing tariff uncertainty between the U.S. and China. Wall Street economists predict that headline inflation rose 2.5% annually in May, up from 2.3% in April.
Core CPI, which excludes food and energy prices, is expected to have risen 2.9% over the last year in May, up from 2.8% in April. “Tariffs should have a clearer impact on goods, but seasonal factors on autos and modest services will keep a lid on core price increases,” Bank of America US economist Stephen Juneau wrote in a note to clients. Many retailers are planning to raise prices in response to the new tariffs imposed by the Trump administration.
The forthcoming announcement from the US Bureau of Labor Statistics will shed light on the inflation data for the first full month after the tariffs took effect. Forecasters predict only a slight increase in prices. Many fashion and beauty brands have already announced future price increases, allowing consumers time to adjust to higher costs.
May CPI report forecasts inflation rise
This approach also provides brands the flexibility to reverse course if there are changes in trade policy. In the post-pandemic landscape, companies are cautious about hiking prices too aggressively.
They fear losing customers even when justified by increased costs. The perception of rising prices among consumers can drive inflation, making early warnings from brands potentially self-fulfilling. Doubts have also been raised about the reliability of inflation data due to recent hiring freezes and layoffs, which have impacted the government’s ability to conduct its consumer price surveys comprehensively.
Despite the need to offset higher import costs, retailers are wary of alienating customers with continuous price hikes. Additionally, the ultra-fast fashion giant Shein, in partnership with Reliance Retail, aims to expand its Indian supplier base and commence overseas sales of India-made clothing within the next year. With tariffs and inflation concerns looming, the fashion and beauty industries face a complex landscape.
Companies must balance cost increases with consumer demand, navigating a path forward in uncertain economic times.
