Service Disinflation, Discounts Mask Tariffs in May CPI
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Downside surprises on both headline and core CPI in May masked nascent, yet still ongoing increases in tariff-related goods prices. Meanwhile, services inflation continues to ease due to falling demand for discretionary services, while declines in auto and apparel prices may have potentially been a result of companies selling off inventories accumulated in the run-up to tariff imposition. 

Service Disinflation, Discounts Mask Tariffs in May CPI

June 11, 2025

Downside surprises on both headline and core CPI in May masked nascent, yet still ongoing increases in tariff-related goods prices. Meanwhile, services inflation continues to ease due to falling demand for discretionary services, while declines in auto and apparel prices may have potentially been a result of companies selling off inventories accumulated in the run-up to tariff imposition. 

Figure 1. Goods Deflation Over as Service Price Growth Slows

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Sources: Bureau of Labor Statistics, Haver Analytics, The Conference Board.

Trusted Insights for What’s Ahead®

  • The Conference Board estimates tariffs may substantially raise inflation in the coming months. Despite a tepid May CPI print, the data shows goods deflation has come to an end and merchandise most prone to tariffs are getting more and more expensive.
  • Rising prices over the summer will likely weigh on demand. Reduced spending may lead companies to cut prices, which will limit the rise in inflation later this year.
  • Disinflationary pressures evident in the services sector will likely partially offset a boost to goods prices emanating from tariffs.
  • Goods prices will lik
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Yelena Shulyatyeva

Yelena Shulyatyeva

Senior US Economist

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