Inflation is fine...for now

If you’re beginning to find each CPI report more confusing than the last, you’re not the only one.

We learned this morning that inflation rose by 2.7% year over year last month. That's well above May’s 2.4% increase and the highest CPI reading since February—but still somehow better than analysts expected for the fifth month in a row. Inflation rose 0.3% month over month in June, another jump from the 0.1% increase in May.

Core CPI, which excludes food and energy, paints a fuller picture. That figure climbed 2.9% last month, coming in higher than the 2.8% increase in May, though still slightly under projections. Month over month, core inflation rose 0.2%.

The devil is in the details: While the numbers show that inflation hasn’t drastically accelerated, peeking below the surface reveals that certain corners of the market have seen steep, sudden increases.

• Egg prices jumped 27.3% year over year, while coffee prices skyrocketed 12.7%.
• The cost of household items like living room furniture jumped 5.1% annually.
• Video subscription prices climbed 13.7%, while the cost of motor vehicle repairs increased 8.2%.

Although investors shrugged off any inflation negativity today, analysts noted that goods prices rose 0.7% annually in June thanks in no small part to tariffs—an early indication that we’re not totally in the clear just yet.

“Inflation pressure will likely remain acute for the rest of the summer,” explained Chief Economist for LPL Financial Jeffrey Roach. “Tariffs have not materially impacted inflation metrics yet so we should expect some further pressure in the coming months.”

What happened to tariffs stoking prices?

Tariffs haven’t hit the economy like a train, but the toot of the horn can be heard in the distance.

“The inflation data details, combined with tepid jobs data and signs that consumers may be paring back their spending, is a macro backdrop that is starting to look more consistent with what we’ve been expecting—not headed towards a recession, but slowing,” explained Head of Investment Strategy at JP Morgan Wealth Management Elyse Ausenbaugh.

That said, not everyone thinks tariffs will be devastating: “For the patient investor, inflation will likely stabilize later this year as consumer demand slows, and firms have time to assess trade shocks,” added Roach.—LB