No matter what metric you’re looking at, US inflation is moving in the wrong direction again.
Whether it’s a house or a carton of eggs, price growth is once again intensifying across a broad range of indicators. Much of that has to do with the same supply and demand factors and labor-market pressures that led to the initial inflation surge in the pandemic, while planned tariffs from President Donald Trump are heightening concerns that prices will rise even more.
The scope of reports indicating a resurgence in price pressures — spanning from input costs to wage growth to inflation expectations — underscores the Federal Reserve’s intent to keep interest rates on hold for the time being. Policymakers’ preferred gauge of underlying inflation probably picked up in January, ahead of data due Friday.
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“Our outlook is very much for inflation to be coming back. We’ve been saying second half of this year, but it seems like the pressures are already starting to build,” said Lauren Saidel-Baker, economist at ITR Economics.
And between the administration’s policies on tariffs and immigration, there’s more to come, she said. “I want to be absolutely clear: there are upside risks to our inflation outlook.”
Here are some of the inflation measures that are heating up again:
Input Costs
Costs of materials like lumber and steel have been high for several years coming out of the pandemic and are moving up even more. A measure of input prices for manufacturers this month reached the highest since October 2022, according to S&P Global. A similar gauge from the Institute for Supply Management rose last month to the highest since May.
Businesses surveyed by the Dallas Fed in February reported that an index of prices for raw materials doubled to the highest since September 2022, around the time when overall US inflation rates peaked. One food manufacturer responded that the items it imports will get more expensive because of tariffs, and higher prices will be borne by consumers.
“I have more uncertainty about the future business/consumer environment than ever before in my 40 years of operating businesses,” the food manufacturer said.
Groceries have come back into the spotlight again largely because of record-high egg prices, due to the worst-ever bird flu outbreak in the US. Persistent price increases in areas like food, as well as other big expenses like housing, healthcare and car insurance, are hindering progress on broader inflation, even as costs of other things like furniture and appliances are largely declining.
Inflation Expectations
It’s easier to raise prices when consumers are expecting higher prices, and several surveys suggest that’s top of mind for consumers and businesses as Trump moves forward with tariffs. Long-run inflation expectations — which look at the next five to 10 years — rose in February to the highest level since 1995, per data from the University of Michigan. Year-ahead expectations are elevated, too, which is dragging down measures of sentiment from the university and another from The Conference Board.
“References to inflation and prices in general continue to rank high in write-in responses,” Stephanie Guichard, senior economist of global indicators at The Conference Board, said in a Tuesday statement. “Most notably, comments on the current administration and its policies dominated the responses.”
Some businesses, meanwhile, are already responding to Trump’s trade policies. Steven Madden Ltd. (SHOO) said Wednesday it will raise some prices in the fall to counter the higher cost of China tariffs. Kontoor Brands Inc. (KTB) — which makes Wrangler and Lee pants — is mulling transferring production, raising prices or taking other “proactive mitigating cost actions” if the Mexico levies come into effect.
Wage Growth
Compensation is often the biggest expense for many companies, which can also be passed on to consumers. Pay growth is generally moderating now that pandemic-era labor shortages have largely subsided, but some metrics bear watching.
Wages for people who stayed in their jobs rose in January for the first time in more than two years, according to ADP Research data. And the government’s monthly job report showed last month’s rise in average hourly earnings matched the biggest advance since early 2022.
