Consumer prices in the United States increased marginally in July, however, the increase in service costs such as air rates and some tariff -sensitive goods – like home furniture – caused a measure of underlying inflation to record its greatest increase in six months.
The Mixed Report of the Office of Labor Statistics of the US Department of Labor, published on Tuesday, also suggested that the deflationary trend in the services sector was stagnating, with a record increase in the cost of dental services and a strong increase in medical care prices.
While the impact of the wide tariffs on the imports of President Donald Trump in the prices of goods has been limited so far, economists continue to believe that greater inflation is around the corner.
Since the Federal Reserve prioritizes inflation in the services, some observers warned that a cut in interest rates in the monetary policy meeting of the US Central Bank, on September 16 and 17, is not an consummated fact, despite the signals of deterioration of the labor market. Much will depend on August employment and inflation reports.
“For those who in the Federal Reserve want to observe and wait, here is much to argue,” said Conrad Dequadros, Senior Economic Advisor of Brean Capital.
For those who seek to cut tariffs, they will argue that they are a specific effect, that their transmission is modest and that they seek to cut them due to the risks for the labor market. Therefore, this report concludes nothing in either of the two senses.
The consumer price index rose 0.2% last month after an increase of 0.3% in June, in line with the expectations of economists.
Although the financial markets breathed in relief with the data, the concerns of the quality of the inflation and employment reports of the government increase, after the budget and personnel cuts that have resulted in the suspension of the collection of data for parts of the CPI basket in some areas of the country.
These concerns were amplified by the dismissal of Erika Mtntarfer, director of the BLS, earlier this month, after the data showed a stagnant employment growth in July.
‘Tariffs have not caused inflation’, according to Trump
On Monday, Trump nominated the economist of the Heritage Foundation, eg Antoni, critic of the BLS, to direct the statistics agency, which generated apprehension among some economists. Antoni contributed to the “project 2025”, the controversial conservative plan to reform the federal government.
The president took advantage of the modest main data of the CPI to reinforce his opinion, sustained for a long time, that consumers would not pay tariffs, and criticized Goldman Sachs economists for what he said were bad predictions on the impact of tariffs.
“The tariffs have not caused inflation or any other problem for the country,” Trump published on his Truth social networks.
The moderation of the CPI reflected a 2.2% drop in gasoline prices. Food prices remained unchanged after two consecutive months of increase of 0.3%. Food prices in supermarkets fell 0.1%, since a 3.9% drop in the price of eggs further compensated for an increase of 1.5% in the price of beef and 1.9% in the price of milk.
The droughts of recent years reduced cattle and increased the cost of food, which caused an increase in meat prices.
In the 12 months until July, the CPI advanced 2.7%, matching the June increase.
Read also: EU inflation increases in July, in line with expectations projected by specialists
Consumer price index rise
Excluding the volatile food and energy components, the consumer price index (CPI) rose 0.3%, its greatest progress since January, after rising 0.2% in June. The underlying IPC was driven by the increase in services prices, including a 4.0% rebound in air rates. Medical care costs increased 0.7%, their greatest increase since September 2022, in the midst of solid increases in hospital and related services.
Dental services prices increased by 2.6%, a record. The maintenance and repair costs of motor vehicles were fired, as did the cost of financial services. The general prices of services increased 0.3% per second consecutive month.
The tariffs continued to drive the cost of furniture and home supplies, which rose 0.7%, while footwear prices rose 1.4%, the largest increase since April 2021. The prices of motor vehicle parts and equipment rose 0.9%, driven by a 1%increase in the cost of tires.
However, appliances prices fell after two months of strong increases, while clothing barely climbed and prescribed medications were cheaper. The prices of basic goods increased a slight 0.2%, which, according to some economists, suggests that the decrease in demand is limiting the capacity of companies to transfer the highest costs of tariffs to consumers. Others disagreed, pointing out the intermittent way in which some tariffs have been implemented.
“Some companies are probably postponing price increases while waiting to see how tariff rates stabilize,” said Bill Adams, chief economist of Erica Bank. “But nobody undertakes to lose money, and companies will eventually move price increases in one way or another.”
The basic CPI increased by 3.1% year -on -year in July, after an advance of 2.9% in June.
Based on the CPI data, economists estimated that the Personal Consumption Expenditure Price Index (PCE) increased 0.3% in July, matching the June increase. This would raise the interannual increase to 3.0% from 2.8% in June. The underlying inflation of the PCE is one of the indicators that the Fed continues to achieve its 2%target.
The American Central Bank left its reference interest rate to one day in the range of 4.25% – 4.50% last month for the fifth consecutive time since December.
The Wall Street shares traded on Tuesday. The dollar depreciated in front of a foreign exchange basket. The yields of the long -term US treasure bonds rose.
The Office of Labor Statistics (BLS) has suspended data collection after years of what economists describe as a sub -financing of the agency, both under Republican and Democratic administrations. The situation has been aggravated by the unprecedented campaign of the Trump administration to restructure the government through deep cuts of mass expenses and dismissals of public employees.
Allowing the need to “adapt the workload of the survey to resources levels”, the Office of Labor Statistics (BLS) completely suspended the collection of IPC data in a city in Nebraska, Utah and New York. It also suspended compilation on an average of 15% of the sample in the other 72 areas. This has led the BLS to use imputations to complete the missing information.
The proportion of imputation of different cells in the CPI data has increased from 10% in July 2024 to 32%. This imputation, that the Office of Labor Statistics (BLS) uses when all prices in the cell of origin are available, maintains the category of the article, but expands the geography. The origin cell method, considered of higher quality by economists, uses the average price of the same article in the same location as the price of the missing product.
Economists said the data would follow closely to detect greater volatility derived from these measures and any change in the trend when the new commissioner assumes its functions.
“It will be interesting to see if the data follow the trajectory we anticipate, given the well -known impact of tariffs,” said Elizabeth Renter, a senior economist from Nerdwallet. “One of the many problems that this guard change presents is the increase in skepticism on data quality. It could be difficult to determine if data changes reflect real improvements.”
With Reuters information
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