U.S. Inflation Rises on Commodity Price Increases and Ongoing AI-Related Spending

Overview

Goldman Sachs' 'U.S. Inflation Monitor' report indicates that U.S. inflation in April 2026 continued to be driven by rising commodity prices and increased AI-related spending. Both core PCE and CPI inflation accelerated, mainly due to higher energy prices, rising rental costs, and increased demand for AI-related hardware and software. Additionally, geopolitical conflicts (such as the Iran war) have significantly impacted inflation, particularly in energy and agricultural product prices.

Core views

Core PCE prices rose 0.24% month-over-month and 3.29% year-over-year in April; core CPI rose 0.38% month-over-month and 2.74% year-over-year. Lagged inclusion of rents and owners' equivalent rent (OER) also contributed to inflation figures. AI-related spending is driving inflation through three channels: first, rising prices of electronic components (e.g., memory), with Producer Price Index (PPI) up 20% year-over-year; second, rising software prices, where lack of quality adjustment may misclassify new features as pure price increases; third, surging electricity demand from data centers, expected to boost PCE inflation by 0.1–0.2 percentage points. The Iran war has caused oil prices to spike, with Brent crude averaging $117 per barrel in April, up from $71 in February. Goldman Sachs estimates this will increase core PCE inflation by about 0.35 percentage points annually. Meanwhile, rising fertilizer prices are pushing up food prices, contributing approximately 1% to food inflation, equivalent to about 0.07 percentage points of overall inflation. Regarding tariff impacts, 90% of the cost has already passed through to consumer prices. Core PCE inflation from tariffs is expected to decline from 2.8% in April 2026 to 0.5% by December 2027. Additionally, long-term inflation expectations have slightly risen due to recent events.

Analysis framework

The report assesses changes in inflation trends by analyzing monthly and annual PCE and CPI data. It focuses on core inflation—excluding volatile food and energy components—and integrates factors such as AI development, geopolitical tensions, and tariff policies for comprehensive judgment. Regarding AI's impact, the report highlights that statistical methodology flaws may incorrectly attribute quality improvements from technological advances to pure price growth, thereby overstating inflation. Furthermore, it enhances conclusion robustness by comparing different inflation measures (e.g., Trimmed Mean CPI and Core Services PCE). In forecasting, the report combines historical data with economic models, considering the effects of external shocks (e.g., war and tariffs) on inflation paths, and provides quantitative projections for inflation trends over the coming years.

Methodology notes

• Macroeconomic frameworkPhillips curve

  The inverse relationship between inflation and unemployment

  Although the report does not directly cite the Phillips Curve, it implicitly references labor market influences on price levels when discussing inflation drivers.

• Valuation MethodP/EV insurance valuation

  Analytical method for assessing inflation’s impact on valuation across asset classes

  While the method is not explicitly applied, the report’s analysis of inflation’s effect on various consumption expenditures and asset returns follows similar logic.

• Industry/Industrial Analysis FrameworkSupply-demand framework

  Price levels determined by supply-demand dynamics

  The report repeatedly emphasizes that supply-side disruptions (e.g., energy supply tightness due to war) and demand-side shifts (e.g., increased investment in AI infrastructure) jointly drive inflation higher.

• Fixed Income and Credit AnalysisSpread analysis

  Tool for analyzing differences in bond yields under varying inflation expectations

  The report derives forward-looking inflation expectations from zero-coupon CPI swap rates, reflecting attention to market-implied inflation expectations embedded in pricing.

• Cycle and Business Condition FrameworkInventory cycle (Kitchin)

  Relationship between short-term economic fluctuations and inflation

  Though not explicitly mentioned, supply chain bottlenecks and commodity price volatility discussed in the report are closely related to the inventory cycle.

• Corporate Fundamentals and Financial FrameworkThree Statements Reconciliation

  Method for analyzing linkages between corporate financial conditions and macroeconomic variables

  The report reflects firm-level pricing behavior through indices like corporate pricing announcement data, indirectly illustrating interactions between business operations and inflation.

• Event Game Theory and Behavioral FinanceExpectation Gap / Expectation Management

  Differences in expectations among the public and market participants regarding economic outlook

  The report thoroughly analyzes changes in inflation expectations, especially revisions triggered by war and policy adjustments, highlighting the importance of expectation management.

Key data

• Core PCE Inflation (Year-over-Year)3.29%MoM +0.24%, acceleration from previous period
• Core CPI Inflation (Year-over-Year)2.74%MoM +0.38%, acceleration from previous period
• Energy Price (Brent Crude, April Average)$117/bblSignificant increase from $71/bbl in February
• Tariff Cost Pass-Through Ratio (as of April)90%Completed within 13 months after implementation
• YoY Increase in PPI for AI-Related Electronic Components20%April data
• Contribution of Software and Accessories to Core PCE Inflation (Peak Forecast)0.6ppExpected in second half of 2026
• Impact of Electricity Price Increase on PCE Inflation (Over Next Few Years)0.1-0.2ppDue to rising electricity demand from data centers

Impact & implications

AI infrastructure development is emerging as a new driver of inflation, especially in electronic components and software services. Geopolitical tensions have intensified volatility in energy and food prices, unlikely to ease in the short term. Tariff effects are gradually waning but will persist into 2027. Rising inflation expectations may pressure monetary policy, increasing the difficulty for central banks to control inflation.

Risks

• Worsening geopolitical situations could lead to further increases in energy and food prices
• Sustained strong AI-related demand may bring broader inflationary pressures
• Persistently rising inflation expectations may undermine the effectiveness of monetary policy

What to watch

• Price trends in AI-related hardware and software
• Changes in energy and commodity prices
• Adjustments in tariff policy and their impact on consumer prices
• Trends in long-term inflation expectations