June Inflation Rises Slightly As Tariff Impacts Begin
Consumer prices rose 0.3% in June, lifting the annual inflation rate to 2.7%, the highest since February, while core inflation excluding food and energy reached 2.9%. Though some tariff-sensitive categories like apparel and household furnishings saw price increases, the overall report showed mixed evidence on the broader inflationary impact of President Trump’s tariffs. Shelter remained the largest contributor to monthly inflation, but real wages declined slightly, falling 0.1% for the month. President Trump renewed calls for steep Federal Reserve rate cuts, though markets and the Fed appear in no rush to respond.
Flat Wholesale Prices in June Underscore Tariff Influence
The producer price index (PPI) showed no change in June, falling short of expectations and offering a mixed signal on inflation amid ongoing tariffs. While prices for final demand goods, including tariff-sensitive communication equipment, increased, those gains were offset by a decline in services. Year-over-year, both headline and core PPI eased to their lowest levels since 2024, at 2.3% and 2.6% respectively, despite May’s upward revisions. Combined with the consumer price index’s moderate rise, the data suggests that tariffs are having only a limited impact so far, and markets now expect the Federal Reserve to hold off on interest rate cuts through the summer.
Retail Sales Rise in June
Retail sales in June rose 0.6%, rebounding from May’s sharp decline and beating expectations, despite the early effects of tariffs driving up prices. After adjusting for inflation, real retail sales increased a more modest 0.3%, but spending remained strong in areas like car dealerships and restaurants. The Federal Reserve’s Beige Book showed slight softening in consumer spending, with discount stores performing well and shoppers increasingly seeking bargains. Meanwhile, the labor market remains resilient, with low unemployment and steady job gains supporting continued consumer activity, even as some unemployed workers face challenges finding new jobs.
