{"id":7887,"date":"2026-03-11T14:47:16","date_gmt":"2026-03-11T14:47:16","guid":{"rendered":"https:\/\/www.rbc.com\/en\/economics\/?p=7887"},"modified":"2026-04-03T00:12:10","modified_gmt":"2026-04-03T00:12:10","slug":"us-cpi-tariff-passthrough-building-beneath-the-surface-in-feb","status":"publish","type":"post","link":"https:\/\/www.rbc.com\/en\/economics\/us-analysis\/us-data-flashes\/us-cpi-tariff-passthrough-building-beneath-the-surface-in-feb\/","title":{"rendered":"US CPI: Tariff passthrough building beneath the surface in Feb"},"content":{"rendered":"\n
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Bottom line:<\/h4>\n\n\n\n

Does February\u2019s benign CPI print even matter in the face of higher oil prices? The answer is yes, and the details are not encouraging for inflation\u2019s path ahead. First and foremost, the core goods sector is being helped by used car prices \u2013 its recent price declines are offsetting upward pressure in other sectors facing tariffs, including auto parts, apparel, recreation goods, and personal care products. The divergence between core goods and core goods ex-used cars continued to grow on a y\/y basis. We have flagged for several months now the pressures building in the pipeline for finished consumer goods, and this month should make clear the tariff passthrough to consumers is here. We continue to expect that pressure will build as core goods prices accelerate into Q2. And we see a limited path for disinflation in core services for the remainder of this year especially in shelter, where we see a floor for additional deceleration. On top of this, food prices continue to climb, a sector that is critical for consumer budgets. Layering on higher energy prices will add to the stress we are already seeing and risks weighing meaningfully on household spending if the situation in Iran is prolonged<\/a>. The risk for second order impacts is also a concern particularly as transport margins are squeezed. Still, we continue to stress that the impacts will not be felt equally across the economy – lower and middle income households will feel the inflationary impacts more acutely. As we watch for signs of growing financial stress, the economic backdrop increasingly feels like it’s heading for a stagflationary lite scenario in 2026.<\/p>\n\n\n\n

For now, we are focusing on separating the short-term from the long-term trends. Here is how we are thinking about this morning\u2019s report in the context of longer-term themes:<\/p>\n\n\n\n

1) Tariff passthrough is still top of mind and is the primary core inflation story<\/strong><\/p>\n\n\n\n

We continue to worry about tariff passthrough, with previous PPI prints signaling higher consumer prices are coming down the pipeline. The reality is wholesalers are charging retailers higher prices. Here is what we saw in those trade-exposed sectors:<\/p>\n\n\n\n