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CNN
3 days ago
- Business
- CNN
Inflation holds steady, but Trump's tariffs are boosting some prices
Falling gas prices helped keep overall inflation tame in July; however, a broader array of products got even more expensive last month, showing that President Donald Trump's expansive tariffs are being passed along to consumers. Consumer prices rose 0.2% in July, keeping the annual inflation rate at 2.7%, according to the latest Consumer Price Index data released Tuesday by the Bureau of Labor Statistics. Stocks were higher on Tuesday. The Dow rose 480 points, or 1.09%. The S&P 500 rose 0.73% and the Nasdaq Composite gained 0.72%. '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. However, considering that energy and food prices tend to be quite volatile on a month-to-month basis, the 'core' index that excludes those two categories is widely viewed as a good measurement of underlying inflation trends. Core CPI rose 0.3% from June, the fastest increase since January, which brought the annual rate to 3.1%, the highest in five months. 'Gas prices are down, but we can't count on that to keep inflation low,' Faucher said. 'So, even if energy prices stabilize and gas prices are just stable, then that means that overall inflation is going to be higher, and that is going to put more pressure on consumers.' The core goods category, which is being closely scrutinized in the wake of higher tariffs, rose 0.2% for the second consecutive month. Economists had expected inflation to heat up slightly last month, to 0.2% from June and by 2.8% annually, according to FactSet. While tariff-exposed goods categories did see some price increases in July, the lion's share of cost pressures came from services, particularly the housing-related shelter category, which has been an inflationary bogeyman in recent years. Still, overall shelter prices (which include measurements of rents and other housing-related costs) continued to cool from pandemic-era spikes. Prices rose 0.2% in July and eased to 3.7% from a year ago, the lowest 12-month increase since October 2021. How tariff-exposed goods prices are rising Trump's sweeping trade policy of tacking steep tariffs on most goods that cross America's borders are widely expected to result in higher prices for businesses and consumers — although not to the extent seen in 2022 and other high-inflationary periods. While there may not be a broad-based acceleration in inflation, higher prices anywhere — especially come Back-to-School season and around the holidays — aren't easy to swallow for many Americans, especially those with little-to-no wiggle room in their budgets. 'The thing to understand is [tariff-induced inflation] is not going to happen with a bang but rather more of a slow deterioration in purchasing power,' Joe Brusuelas, RSM US chief economist, told CNN. Many economists also believe that tariffs will cause a one-time lift in prices and not necessary a lasting and accelerating surge in price hikes. There's a laundry list of reasons why tariff-driven price hikes are a slow boil: Businesses loaded up their warehouses with pre-tariffed goods; higher costs have been split by entities along the supply chain, lessening the blow at the retail store; and Trump's fits-and-starts approach to tariffs has meant that the bulk of them did not go into effect for months. At the same time, inflation has remained relatively tame for good and not-so-good reasons: Ongoing deflationary trends in key areas, marking a continued unwinding from pandemic-era shortages and price spikes; falling gas prices (they're down 9.5% from July of last year); there are many other components of CPI (core goods are just 25%); and then because of depressed consumer demand in areas such as travel. Monthly economic data can be quite volatile, and economists frequently caution that it's important to take a longer view. However, CPI reports and, especially, July's data are bearing hallmarks of higher tariffs, albeit in a scattershot fashion: Commodities excluding food and gas: Prices rose 0.2% for the second consecutive month after being flat in May. This index excludes volatile food and energy components and is being closely scrutinized in the wake of higher tariffs. Apparel and footwear: Trump's tariffs were expected to raise the cost of most clothing and footwear, but the hardest-hit items were expected to be some of the most basic (cheap T-shirts, socks, sneakers and undies). The clothes and shoes that land on retail shelves are largely sourced from countries such as Vietnam and China, which have tariff rates north of 20% and 30%, respectively. Overall apparel prices nudged up just 0.1% in July after rising 0.4% in June. Footwear, however, shot up 1.4% in July — the highest monthly rate in more than four years — after rising 0.7% in June. Appliances: This was one of the first categories to show sharper increases in prices. After rising 0.8% in April and May and then 1.9% in June, prices for appliances settled back down in July, falling 0.9%. Furniture and bedding: Price hikes accelerated in July, rising 0.9% after posting a 0.4% increase in June. Outdoor equipment and supplies: This import-heavy category saw prices jump 2.2% in July, the highest in more than two years, after falling 0.1% in June. Sporting goods: The pace of price hikes remained elevated, although not to the extent in June when they rose 1.4%. Prices were up 0.4% in July. Tools, hardware and supplies: During much of 2023 and 2024, prices fell for this category. However, since April, prices have risen between 1.1% and 1.2% each month (the index was up 1.2% in July.). Toys: After rising by 1.3% and 1.8% in May and June, respectively. Toy prices inched up 0.2% in July. More price hikes could be coming down the pike, however, Hasbro CEO told CNN's Audie Cornish recently. The vast majority of toys are produced in China. Windows and floor coverings and other linens: The US textile industry has shrunk considerably in recent decades, resulting in a high reliance on imported linens. After a record-high 4.2% increase in June, prices rose 1.2% in July. Fed at the crossroads, BLS in the crosshairs The tariff pass-through to consumers appeared to be slower in July than it was in June, said Oliver Allen, senior US economist at Pantheon Macroeconomics. 'I don't think that necessarily means that it's over, it's done, or we've seen the peak,' he said. 'I don't think that's the case at all.' The pre-tariff stockpiling has mitigated some of the price increases thus far; however, it can't happen indefinitely, he said. 'The question we have on top of that is where does that (price increase) show up? Who eats that? Where does that show up in the supply chain?' he said. 'There's probably going to be some of that eaten into the supply chain, but I think a lot of it is going to be passed on to consumers.' 'But as far as the economy is concerned, either way, it's not a particularly good outcome,' he said, adding that businesses and consumers will have less money to spend. As for the Federal Reserve, Tuesday's inflation data doesn't necessarily mean the central bank will stay on the sidelines at its upcoming meeting in September, wrote Michael Hanson, senior global economist at JPMorgan Securities. 'Today's report does not pressure the Fed away from a likely insurance cut at its next meeting given concerns about a weakening labor market,' he wrote in a note Tuesday. The US labor market appears to be on much shakier ground than was thought heading into the Fed's last rate decision in late-July. The August 1 jobs report showed that job gains in July were tepid, at 73,000, and that job gains in the two months prior were revised down substantially. The large downward revisions put the BLS in the crosshairs. Trump fired BLS Commissioner Erika McEntarfer, baselessly claiming she 'rigged' the data (an allegation that Trump's former BLS head and a cadre of statisticians and economists resoundingly disputed). The upheaval at the BLS does not directly impact July's CPI report; however, other actions taken by the Trump administration are potentially leaving their mark. The BLS, one of many federal agencies subject to the Department of Government Efficiency's blunt axe, has increasingly cut back on the data collection that feeds into the critical pricing gauge. The geographic and sample cuts that have taken places since April aren't expected to massively affect the overall annual CPI rates; however, they could make the monthly data even more volatile, economists say. The next big piece of inflation data is due out Thursday when the BLS releases the Producer Price Index, which will provide a look at how prices are changing upstream of the consumer.
Yahoo
4 days ago
- Business
- Yahoo
Inflation holds steady, but Trump's tariffs are boosting some prices
Falling gas prices helped keep overall inflation tame in July; however, a broader array of products got even more expensive last month, showing that President Donald Trump's expansive tariffs are being passed along to consumers. Consumer prices rose 0.2% in July, keeping the annual inflation rate at 2.7%, according to the latest Consumer Price Index data released Tuesday by the Bureau of Labor Statistics. Stock futures rose after the data release. Dow futures jumped 210 points, or 0.47%. S&P 500 futures rose 0.45% and Nasdaq 100 futures rose 0.5%. '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. However, considering that energy and food prices tend to be quite volatile on a month-to-month basis, the 'core' index that excludes those two categories is widely viewed as a good measurement of underlying inflation trends. Core CPI rose 0.3% from June, the fastest increase since January, which brought the annual rate to 3.1%, the highest in five months. The core goods category, which is being closely scrutinized in the wake of higher tariffs, rose 0.2% for the second consecutive month. Economists had expected inflation to heat up slightly last month, to 0.2% from June and by 2.8% annually, according to FactSet. This story is developing and will be updated. Sign in to access your portfolio
Yahoo
07-08-2025
- Business
- Yahoo
Trump's Fed gov. will be 'trial balloon' for Fed chair in 2026
PNC Financial Services Group chief economist Gus Faucher joins Market Catalysts with Julie Hyman to discuss President Trump's pick for Federal Reserve governor and why he believes the new governor will "likely" end up being a candidate for Fed chair next year. To watch more expert insights and analysis on the latest market action, check out more Market Catalysts. Gus, I also finally want to ask you about the implications of, um, Adriana Kugler's seat on the FOMC now being open, President Trump being able to appoint someone or, uh, to succeed her. How are you thinking about the, you know, the influence or the independence of the Fed at this point? Uh, obviously, the president has the ability to appoint the person that he wants to be on the board of governors subject to Senate approval. Uh, the president has made it clear that he favors rate cuts. And so, I'm assuming the person that he appoints will adopt that view as, as well. Uh, and I think this is likely a trial balloon. I think that, you know, given that Chair Powell's term as, as chair expires in early 2026, uh, I think it's likely that whomever the president appoints is going to be in the running to be Fed chair. Uh, but I think that, you know, the president will be appointing someone who agrees with his policies as he has the right to do. Uh, but I think that, you know, it's going to be very interesting to see how all of this plays out over the next six, nine months with Chair Powell and the president's obviously disapproval of, of his views, uh, a new Fed governor, uh, and then, you know, the dissents that we saw last week, which were, you know, we hadn't seen dissents by two members of the Board of Governors in 30 years. Yeah, certainly, it will keep us guessing and busy, and we'll catch up with you again, Gus. Thank you very much to Gus and to our Jennifer Schonberger. Appreciate it. Related Videos It's 'entirely possible' bitcoin could fall below $100K by 2026 Trump's Tariffs Take Effect in Push to Reshape Global Trade The U.S. Economy Is Resilient but Cracks Are Showing. Here's Why. Trump Hails New $100B Apple Investment, Threatens 100% Tariff on Chips Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
31-07-2025
- Business
- Yahoo
Consumer spending heated up a bit last month – but so did inflation
US consumers continued to spend in June, powering the economy in the process, despite tariff-related price hikes becoming more present on store shelves and online. Consumer spending rose 0.3% from May, when spending was flat, according to Commerce Department data released Thursday. The report — which provides a comprehensive look on how prices are changing as well as how households' income, spending and savings are faring — showed that inflation picked up as well last month. The Personal Consumption Expenditures price index — the inflation gauge the Federal Reserve uses for its 2% target rate — rose 0.3% on a monthly basis, which lifted the annual rate to 2.6%, the highest since February. Tariffs are starting to leave a bigger mark on overall inflation; however, consumers, whose spending powers more than two-thirds of economic activity, are largely 'holding up OK,' Gus Faucher, chief economist of The PNC Financial Services Group, told CNN in an interview. 'I think we're seeing modest growth in consumer spending,' he said. 'The economy has definitely downshifted over the past year; we're seeing slower job growth, slower income growth and along with that is coming slower consumer spending growth.' 'You add on top of that, tariffs — both the price increases and the uncertainty that's created — and consumers have turned a bit more cautious,' he added. Tariffs leaving their mark Economists were expecting PCE to rise 0.3% from 0.2% in May and accelerate on an annual basis to 2.5% from the initially reported 2.3% increase (May's annual inflation rate was revised upward to 2.4% in Thursday's report). Excluding energy and food, which tend to be quite volatile, the 'core' PCE index showed price hikes picked up speed in June, rising 0.3% from May (the fastest gain in four months), and holding at an annual rate of 2.8% The PCE price index was expected to heat up slightly in part because of rising gas prices, which had been falling for much of the year, as well as pricier goods from businesses passing along tariff-related costs to consumers. That was indeed the case, according to Thursday's report: Energy prices shot up 0.9% after falling 1% the month before. Goods prices rose 0.4% (durable up 0.5%, non-durable goods up 0.4%), marking the highest monthly rate since January when prices bumped higher after holiday season discounts. 'Durable goods prices were up a half of a percent,' Faucher said. 'These things can bounce around form month to month, and I don't want to read too much into everything; but, certainly, that's suggestive of tariff costs being passed along to consumers, and I think we're going to see more of that over the next few months.' President Donald Trump's trade policies, which include widespread (but highly volatile) tariffs on imported goods from countries around the world, are starting to result in higher prices for consumers as well as elevated inflation rates. The tariffs are paid by the companies that import the goods, but then those price increases are often spread out through the supply chain and, oftentimes, passed onto consumers in some form. And while the higher tariffs aren't expected to trigger an inflationary surge like Americans saw in 2022, the price hikes won't be easy for everyone, Faucher said. 'It's going to be uncomfortable for consumers,' he said. 'I think that they're going to start to see it, and they're going to notice that their paychecks aren't going as far as they were.' Stock futures were relatively unchanged after the latest spending and inflation data. Dow futures were up 100 points, or 0.23%. S&P 500 futures rose 0.92% and Nasdaq 100 futures gained 1.33%. This story has been updated with additional developments and context. CNN's John Towfighi contributed to this report. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Daily Mail
14-06-2025
- Business
- Daily Mail
Panic in Trump heartland as tariffs choke investment
President Donald Trump's tariff policies are posing a threat to the revival of US manufacturing. A push for a 'Made in America' renaissance has been a key priority for the White House, with particular focus on the American Rust Belt. But companies are warning how turmoil and confusion around Trump's trade wars is slowing the progress made in reinvigorating American factories. The latest jobs report revealed that manufacturing jobs declined by 8,000 last month - the most this year so far. Anxiety is high in the Midwest, which remains home to the largest concentration of US manufacturing jobs — despite losing tens of thousands of workers to offshoring in the early 2000s. 'Overall, it is going to be a drag on the US economy,' Gus Faucher, chief economist for PNC Financial Services Group in Pittsburgh, told Bloomberg. 'In particular, it's going to be a drag on the Midwestern economy.' US factory activity also contracted in May for the third month in a row. The Midwestern states of Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin lost almost 2 million manufacturing jobs between 1998 and 2010, Bloomberg reported. This was due to companies looking to cheaper production and labor outside the US - in China in particular. In recent years, a cautious optimism had returned, as supply chain shocks from the pandemic pushed some companies to bring production back to the US. But frequent changes and uncertainty around where Trump's tariff policy is headed has 'got people spooked,' Andrew Anagnost, CEO of Autodesk, told the outlet. The company sells software used by manufacturers to design factories and improve processes. 'The current operating mode is just the death to long-term investment,' he said. While construction projects that were already underway are still going ahead, he added, confusion about the future is stalling new work. Some states are harder hit than others by tariff plans. Illinois, for example, will see a 16 percent increase in effective tariff rate on manufacturing inputs, according to the National Association of Manufacturers. This means that the total cost of importing goods used in production increases, which could lead to reduced profits, supply chain shocks or higher prices for consumers. Minnesota will also see a 16 percent increase, while Missouri is facing a 15 percent hike. The sense of uneasiness is particularly strong in the automotive industry, which is facing 50 percent tariffs on steel imports, a measure Trump announced at an appearance at Irvin Works, a steel plant outside the Pittsburgh city limits in West Mifflin, last month. Kenosha, Wisconsin-based company Snap-on provides tools used by car mechanics. Its CEO told Bloomberg that while the company can manage the impact of tariffs as it mostly serves US customers with domestically-made products, auto shop workers are 'confidence poor.' Nicholas Pinchuk said customers are worried about economic disruption even if they are fans of the President. 'They're still big Trump fans. This is Trump territory. They believe in where we're going, but they're worried that something's going to happen,' he said. Even companies that stand to benefit from tariffs are expressing anxiety about what the future might hold. Ross Widmoyer, CEO of textile manufacturing company Faribuault Mill, told the outlet he has been getting calls from retailers looking for a producer in the US. But he is still concerned that the trade wars could impact economic growth. 'If there's a slowdown in consumer spending, it doesn't matter if you're making products domestically or overseas, and that's not good for anybody,' Widmoyer, who is also chairman of the Minnesota Manufacturers' Council, said. The Trump administration has pointed to announcements from major companies of planned investment in the US as proof the policies are working. For example, Volkswagen's CEO confirmed last month that the company is looking to make a 'massive' US investment. Oliver Blume, VW's top boss, said he has been in contact with members of the Trump administration, including US Commerce Secretary Howard Lutnick. His strategy to shield VW from steep tariff costs appears two-fold: maintain open communication with US officials and continue ramping up investment in American businesses.
