The first CPI report of the post-Erika McEntarfer era at the BLS conformed to expectations.
The core gauge rose 0.3% MoM, the briskest since January but in-line with estimates. The unrounded print was 0.322%. The YoY read was a touch high at 3.1% versus 3% expected.
In the normal course of business, this would be mostly unremarkable. But Tuesday’s release took on an extra air of drama given the staff shakeup at the top of the BLS, where Heritage Foundation economist E.J. Antoni, a critic of the bureau and a contributor to Project 2025, is set to take over for McEntarfer. Or set to be nominated to take over for McEntarfer.
If he’s not, Trump should probably be pleased with Tuesday’s release. It was warm enough to be believable, but not warm enough to cast aspersions on his tariffs. Markets will probably like it.
The MoM and YoY prints on the headline gauge were 0.197% and 2.7% respectively. Those were on the cool side.
The release was benign where it counted for everyday people just trying to get what they need to survive. The shelter index, for example, rose a tolerable 0.2% for a second month and the grocery gauge actually showed a 0.1% decline, the first month-to-month drop since April. A third outsized monthly drop on the gasoline index in five biased the energy gauge lower.
Sifting through the release, there wasn’t much to suggest the tariffs are having a dramatic impact on prices. Core goods rose 0.21%, more or less the same as June. Stripping out cars, core goods were just 0.22%, less than half the prior month’s increase.
The apparel index rose 0.1% from June and it actually fell YoY. New car prices were flat MoM and barely rose from a year ago. Household furnishings were warm, as expected, but the appliances gauge showed a decline. And so on. There’s just not a lot to see here.
Ironically, it was services which came in on the warm side. Airfares rose, car insurance too and medical care services posted its largest month-to-month gain of 2025. Excluding energy, services prices rose 0.5% MoM, the briskest since January.
The CPI-derived version of the so-called “supercore” services measure the Fed monitors closely likewise rose 0.5%. With one exception (January) that metric hasn’t been a problem in well over a year. To see it back in the news at a time when we’re supposed to be worried about goods prices was notable.
With that caveat, it’s probably fair to call this CPI release better-than-feared. There was nothing to alter the Fed path, which is to say if the other two inflation updates the Committee sees between now and next month’s FOMC look like July’s CPI report, they’re definitely cutting. And with Stephen Miran set to vote, I’d argue they’ll be cutting even if those updates are less favorable than Tuesday’s.
100% gut feel and I’m not an American, but have the feeling that most companies selling to consumers are waiting for each other to blink, i.e. to pass through the tariff inflation. No one wants to be first, because there will be hell to pay of course. Suspect it will happen around autumn, then they have had to eat the cost for 6 months and they’ll be done with it.
It will increase inflation sure. Does that mean Fed needs to keep rates high? Definitely not a Trump supporter, but I don’t see how lowering rates at that point will further fuel this inflation given where most of the consumers currently stand. The tariffs are a tax increase (similar to VAT) and those didn’t lead to follow-on inflation in previous instances.
Curious what will happen but to me the discussion around this seems to be mostly: inflation up so rates needs to go up as well. Would be keen to hear the other side. Lower funding for health insurance should bite the consumer too, right?
News from the industrial automation front:
“August 11, 2025 Import Surcharge Communication
Dear Customer,
At ifm, we deliver affordable automation solutions through a global manufacturing network strategically located for talent, lean practices, and supply chain access. As you may be aware, the U.S. government has confirmed additional tariffs on imported goods, with new rates effective as early as August 1st and August 7th. These changes significantly increase tariff rates on imports where our products are manufactured and sourced.
To offset the impact of these new tariffs, we will be adjusting our import surcharge from 8% to 12% on products not manufactured in the United States, effective for shipments on or after August 18, 2025. We will continue to provide details on country of origin, commodity code, and the itemized surcharge amount for each affected product.”
“waiting for each other to blink” – HA! not likely.
Tariffs are a consumption tax. Taxes make the buyer pay more. Cause and effect. Things imported and produced here will cost more. Maybe AI will lay off so many people that overall wages will not increase. Whatever happens, Trump will rage.