US DATA: US CPI Wrap: No Sign Of Faster Tariff Passthrough In July CPI Report
Aug-12 15:14
The July CPI report saw further acceleration in monthly core CPI inflation but it was driven by the volatile supercore category. Instead, core goods inflation, an area of focus for tariff passthrough clues, was surprisingly soft as it only maintained the monthly clip seen in June whilst median core goods inflation moderated after a strong increase in June.
- Core CPI inflation was exactly in line with the median unrounded analyst estimate we had seen for July at 0.32% M/M, accelerating from 0.23% in June and 0.13% in May for its strongest month since January.
- The breakdown relative to expectation was dovish however, as core goods underwhelmed (0.21% M/M vs average expectations closer to 0.4%) in a month that was expected to show increasing signs of tariff passthrough ahead of perhaps the largest monthly increases in the fall months. It follows a very similar 0.20% M/M in Jun after a weak -0.04% M/M in May.
- Notably, this came despite used cars prices exceeding expectations (0.48% M/M vs estimates closer to 0.3) although that’s still a modest increase after four consecutive monthly declines averaging -0.6% M/M.
- Indeed, MNI calculations of median core goods inflation across 56 items softened to 0.28% M/M after a particularly strong 0.44% in June and 0.29% in May. This is still a robust pace - it averaged 0.0% M/M in 2024 and 0.06% M/M in Q1 - but clearly doesn't show any further acceleration in what would have been a sign of accelerated tariff passthrough.
- The offsetting factor to softer than expected core goods inflation was core services (0.36% M/M vs average expectations around 0.30%), driven by the volatile “supercore” category at 0.48% M/M whilst rental inflation was exactly as expected.
- Airfares played a large role here (4.0% vs 1.5% expected) and as always won’t feed into PCE. Some notable PCE inputs meanwhile saw partly offsetting large moves from booming dental services (2.6% M/M, 4.3% of supercore CPI) and further declines in lodging (-1.0% M/M, 6.4% of supercore).
- Taking a step back, core CPI inflation firmed to 3.06% Y/Y (cons 3.0) after 2.93% Y/Y for its strongest since Feb 2025. Both three- and six-month run rates are tracking softer than this, at 2.8% and 2.4% annualized respectively.
- Adding to the net dovish take from core CPI details, headline CPI undershot with 0.20% M/M in July (MNI median 0.24) owing to downside surprises in both food (0.05% M/M vs expectations 0.25%, including food at home at -0.12% M/M for only the second decline in the past fifteen months) and energy (-1.1% vs 0.6%, despite gasoline being as expected).
- It saw headline CPI inflation little changed at 2.70% Y/Y after 2.67% in June, holding the prior acceleration from the April low of 2.31% Y/Y.
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MACRO OUTLOOK: MNI US Macro Weekly: Staying Calm, Carrying On
Jul-11 21:01
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- The limited set of data releases in the return from the July 4 long weekend didn’t greatly change the outlook for the US economy, reflected by almost-unchanged Fed cut pricing (still 50bp through year-end).
- Employment data appeared to confirm a “low firing, low hiring” labor market, and GDP growth tracking has settled in the 2-3% Q/Q SAAR area for Q2 with signs of gradual but not dramatic slowing in Q3.
- Inflation looks set to pick up in Q3 though perhaps not to as dramatic an extent as previously feared, and in the meantime, inflation expectations are not showing signs of de-anchoring.
- On the latter front, there was perhaps surprisingly little market reaction to the White House’s series of announced tariff rates including on Brazil, Canada, Japan and South Korea, some of which appeared to be higher than had been expected, not to mention a hefty 50% levy on copper imports.
- Fed speakers were limited in number but impactful. Gov Waller reiterated his call to consider a July rate cut, but also gave an extensive (and hawkish-leaning) speech on how he envisaged the future size and composition of the Fed's balance sheet – a subject that will be of growing importance in the coming months as reserves shrink amid the Treasury’s post-debt limit cash rebuild.
- St Louis Fed Pres Musalem warned of tariff inflation impacts potentially extending well into 2026, while Chicago’s Goolsbee said that the latest round of tariff announcements could push back further the Fed’s resumption of easing.
- Conversely, San Francisco's Daly confirmed at an MNI event that she sees two cuts by year-end, sounding increasingly unconcerned about the tariff impact on inflation and saying that she doesn't want to get "behind" in adjusting the policy rate.
- The main headline from the June FOMC meeting minutes was on the Committee's split on the rate outlook, which had already been encapsulated in the Dot Plot mostly split between two and zero cuts for the year. One hawkish note was that "several participants commented that the current target range for the federal funds rate may not be far above its neutral level".
- June CPI is the highlight of next week's US data slate, with MNI's early roundup of analyst expectations showing an anticipated acceleration in the main measures of inflation.
- But even a downside surprise would be unlikely to persuade the Federal Reserve to seriously consider cutting rates in July, given the expected pickup in tariff-related prices in coming months. That said, further evidence of soft price pressures would certainly help lay the groundwork for a resumption of easing in September, particularly if PCE is confirmed to be tame.
- Wednesday’s PPI will refine the post-CPI estimate of PCE. We also have a busy Thursday for data with June Retail Sales alongside the customary weekly jobless claims report.
US OUTLOOK/OPINION: CPI/PPI, Retail Sales, Housing Data Feature Next Week
Jul-11 20:50
- June CPI is the highlight of next week's US data slate.
- Wednesday’s PPI will refine the post-CPI estimate of PCE.
- We also have a busy Thursday for data with June Retail Sales alongside the customary weekly jobless claims report.
- Data Friday will help offer the latest gauge of residential investment activity, which has been one of the weak points in the economy so far this year.
| Date | ET | Impact | Event |
| 15 Jul | 0830 | ** | Empire State Manufacturing Survey |
| 15 Jul | 0830 | *** | CPI |
| 15 Jul | 0855 | ** | Redbook Retail Sales Index |
| 15 Jul | 0915 | Fed Vice Chair Michelle Bowman | |
| 15 Jul | 1245 | Fed Governor Michael Barr | |
| 15 Jul | 1445 | Boston Fed's Susan Collins | |
| 15 Jul | 1845 | Dallas Fed's Lorie Logan | |
| 16 Jul | 0700 | ** | MBA Weekly Applications Index |
| 16 Jul | 0830 | *** | PPI |
| 16 Jul | 0915 | *** | Industrial Production |
| 16 Jul | 0915 | Cleveland Fed's Beth Hammack | |
| 16 Jul | 1000 | Fed Governor Michael Barr | |
| 16 Jul | 1400 | Fed Beige Book | |
| 16 Jul | 1830 | New York Fed's John Williams | |
| 17 Jul | 0830 | *** | Jobless Claims |
| 17 Jul | 0830 | *** | Retail Sales |
| 17 Jul | 0830 | ** | Import/Export Price Index |
| 17 Jul | 0830 | ** | Philadelphia Fed Manufacturing Index |
| 17 Jul | 1000 | ** | NAHB Home Builder Index |
| 17 Jul | 1000 | * | Business Inventories |
| 17 Jul | 1000 | Fed Governor Adriana Kugler | |
| 17 Jul | 1245 | San Francisco Fed's Mary Daly | |
| 17 Jul | 1330 | Fed Governor Lisa Cook | |
| 17 Jul | 1600 | ** | TICS |
| 17 Jul | 1830 | Fed Governor Christopher Waller | |
| 18 Jul | 0830 | *** | Housing Starts |
| 18 Jul | 1000 | *** | U. Mich. Survey of Consumers |
FED: Chicago's Goolsbee: Latest Tariffs Require Caution
Jul-11 20:46
Chicago Fed President Goolsbee tells the Wall Street Journal in an interview Friday (link) that this week's latest round of tariff announcements could force him and the FOMC to wait for longer before having enough clarity to cut rates.
- "I'm hopeful that when we go back and talk to [businesses] now, they don't say, 'Oh, this is putting us back to where we were on April 3... But I don't know, because this has just happened...The more we keep adding things to the mix that make it hard to figure out, 'Are prices going to be rising or not?' The more it's just throwing more dirt back in the air."
- On the recent criticism from the Trump administration, Goolsbee said "I'm still pretty confident that the culture of the Fed is one that everyone takes the job seriously and recognizes how important independence is from political interference."
