{"id":10444,"date":"2026-05-07T19:49:38","date_gmt":"2026-05-07T19:49:38","guid":{"rendered":"https:\/\/www.rbc.com\/en\/economics\/?p=10444"},"modified":"2026-05-07T20:21:48","modified_gmt":"2026-05-07T20:21:48","slug":"inflation-pressures-build-as-consumers-lean-on-savings","status":"publish","type":"post","link":"https:\/\/www.rbc.com\/en\/economics\/us-week-ahead\/inflation-pressures-build-as-consumers-lean-on-savings\/","title":{"rendered":"Inflation pressures build as consumers lean on savings"},"content":{"rendered":"\n
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The focus next week will be on inflation. The CPI and PPI data will provide a fresh read on how dual inflation shocks \u2013 energy and tariffs \u2013 are impacting prices. We expect to see another spike in April headline inflation (+0.7% m\/m) due to gasoline prices remaining elevated. But even after stripping out food and energy, we expect core inflation will accelerate to +0.3% m\/m, pushing up the y\/y pace to 2.7%. <\/strong><\/p>\n<\/div><\/div>\n<\/div>\n<\/div>\n\n\n\n

Part of the acceleration will likely come from housing inflation. Challenges associated with missing data during the October government shutdown led to methodology changes<\/a> that could translate to a hotter-than-usual housing print in the April. Since housing accounts for roughly 40% of the core CPI basket, there is more upside than downside risk to this month\u2019s print.<\/p>\n\n\n\n

Headline PPI is expected to rise +0.5% m\/m primarily due to higher energy prices. Our core PPI forecast expects a more modest rise of +0.2% m\/m. <\/strong> We anticipate that these higher prices will be passed along to consumers in the coming months. The growing gap between PPI finished core consumer goods and CPI core goods illustrates the concern \u2013 the gap between y\/y pace of growth widened to 2.1ppts in March 2026 from 1.0ppts in September 2025. The growing gap suggests that wholesaler acquisition costs are rising faster than retail firms’ ability to raise prices for consumers \u2013 and that is a concern for corporate profits. <\/p>\n\n\n\n

Our<\/strong> retail sales forecast calls for a strong headline print (+0.5% m\/m)<\/strong>, driven by higher gas prices, though weaker autos will partly offset some growth. Since retail sales are nominal, we are watching real retail sales closely for a better gauge of consumer health. Real retail sales growth has trended lower on a year-over-year basis since 2025, but we do not expect it will turn negative in the face of higher gas prices. For now, households appear to be saving less at the expense of higher gasoline prices \u2013 the personal savings rate is down 1.5ppts from year-ago levels. Still, tax refunds should continue to support spending, though these are disproportionately benefiting high-income households. This dynamic also means we expect to see  consumer sentiment continue to grind lower, as middle- and lower-income households bear the brunt of inflation\u2019s impact on their household budgets.<\/p>\n\n\n\n

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Outside of tier-one data, here\u2019s what else we\u2019re watching next week:<\/p>\n\n\n\n