US core inflation heats up in July amid Trump tariffs: Prices at your nearest grocery stores to increase?
US inflation remained steady at 2.7% in July, but core inflation rose to 3.1%, exceeding expectations. Increased prices for takeout, used cars, housing, and medical care contributed to the rise. While energy prices declined, Trump's tariffs are beginning to impact consumer costs, with businesses potentially passing these expenses onto consumers.
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The Consumer Price Index (CPI) rose 2.7% in July compared to the year before, remaining flat from June, the Labor Department said Tuesday
The annual inflation rate held steady in July as US President Donald Trump's tariffs had less of an impact on consumer prices than forecasters expected. However, the US prices continued to increase in July, according to key economic data released on Tuesday. This comes at a time as Trump's international tariffs shakeup started to impact consumer costs.
The Consumer Price Index (CPI) rose 2.7% in July compared to the year before, remaining flat from June, the Labor Department said Tuesday. But core CPI – which strips out volatile food and energy prices – heated up to 3.1% year-over-year. That's above expectations of a 3% pace and higher than its 2.9% reading from June.
Prices for takeout and restaurants jumped up 3.9% over the last year, pushing up overall food prices by 2.9%. Prices for used cars, housing and medical care also jumped up higher than the overall rate.Overall energy prices were down 1.6% for the year, what probably stabilized the overall pace of inflation.
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According to Guardian, the report is the latest to show that the US economy is experiencing some turbulence from Trump's unparalleled shakeup of US trading policy. 'We have seen moderate inflation over the last year … certainly, prices are not going up nearly as quickly as they were a few years ago,' Gus Faucher, senior vice president and chief economist at PNC Financial Services Group, told CNN in an interview. 'But I do think that consumers are going to start seeing more price increases at the grocery store, at Amazon, things like that.'
'Consumers are going to start to feel a little more stretched over the next few months as we see more of the impact of tariffs passed through from businesses to consumers,' he added.
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Apart from the 10% universal tariff on all imports, Trump has set higher tariffs for dozens of countries, including the US's top trading partners. Though most of these tariffs went into effect in August, Trump's 10% universal tariff, along with higher tariffs on certain industries like steel and aluminum, have been in effect since the spring.Economists say that it takes time for tariffs to show up in consumer prices. Major companies have warned of incoming price hikes on everything from luxury cars to everyday goods like toilet paper and razors due to multi-million and even billion-dollar tariff impacts.
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Some retailers initially boosted their inventories to cushion the blow of tariffs and maintain stable prices. However, the recent surge in prices indicates that businesses have begun passing these costs on to consumers — just as executives from companies like Walmart, Nike, and Macy's had warned.For months, US businesses have been bearing the brunt of Trump's tariffs – taking around 64% of the hit, Goldman Sachs economists said in a report this week. But July's data signals that these firms may have reached a point of no return where they are forced to pass additional tax costs along to the consumer in the form of price hikes.
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