Muted U.S. inflation suggests companies are feeling little urgency so far to pass along the cost of tariffs to consumers.

Unit labor costs—what businesses pay employees to produce one unit of output—jumped 5.7 percent in the January-to-March period, the most in a year.

Imports surged in Q1 as companies scrambled to secure merchandise ahead of tariffs’ implementation, while the core PCE price index rose more than expected.

“Immigration was an important driver of the labor market rebalancing [after the Covid-19 pandemic]. Reduced immigration could therefore fuel renewed inflationary pressures.”

“With the economy set to cool sharply in the coming months as tariffs take their toll, price-sensitive consumers are poised to become more judicious with their spending.”

The core CPI, which excludes often-volatile food and energy costs, increased 0.1% from February to March—the least in nine months.

February saw weaker-than-expected consumer spending and higher inflation.

The latest numbers from the BEA include an upward revision for GDP and downward revision for inflation.