Prices for goods affected by tariffs saw the biggest surge, but prices subject to foreign imports fell.
U.S. consumer prices remained stable in July, with rising inflation wiping the economy.
According to a Labor Ministry report released Tuesday, the Consumer Price Index Report (CPI) rose 2.7% over this period last year, following a 2.7% increase in June. Prices rose 0.2% in July, compared to 0.3% in June each month.
Data beats the expectations of analysts. Economists surveyed by Dow Jones expected an annual increase of 2.8%.
Energy costs have fallen 1.1% over the past 12 months. Gasoline in particular decreased by 2.3% per year. Grocery prices fell 0.1%, but the cost of eating out from home increased by 0.3%. Shelter costs increased by 0.2%.
The cost of health services rose 4.3%. Airline prices rose 4% compared to this time last year.
Increases and decreases
“Today’s CPI report reveals that inflation once again beats market expectations, is stable and highlights President Donald’s (Donald) commitment to reducing costs for American families and businesses,” White House press chief Caroline Leavitt said in a statement to reporters.
But looking deeper into the data, we can see another story. Prices rose in areas that were heavily affected by tariffs, but in areas that were not affected by tariffs, they decreased.
“We really see inflation data is actually diverging right now between import-sensitive and import-independent sectors and import-independent sectors,” said Daniel Hornn, a senior fellow at MIT and former deputy director of the National Economic Council.
Compared to this period last year, hotel prices fell 1.3%, while car rental prices fell 2.9% as Americans pulled back discretionary travel spending. However, products such as tools and hardware prices rose 1.6%, car parts rose 0.9%, and footwear spiked 1.4%.
The latest data shows that after Trump fired Erica Mantelfer, director of the Bureau of Labor Statistics, in the recently revised employment data, much fewer jobs were created than initially reported.
The president intends to replace her with Economist, Eji Antoni of the Heritage Foundation. He was a contributor to Project 2025, a far-right wish list compiled by a conservative think tank.
While on the campaign trail, Trump kept his distance from Project 2025, but he appointed many of the chapters to several key roles in the federal government. This includes Brenden Kerr, who was currently heading the management and budget offices by the Federal Communications Commission and Russell.
Look ahead
Hornung believes the latest data shows the impact of tariffs and is expected to rise as trading partner fees rise.
“The way it appears in the data is probably increasing relatively steadily over the course of several months, not literally more than a month,” Hornung said.
“It could last longer due to the way tariffs are being introduced. On April 1, there will be a set of tariff announcements that will take several months to move on to consumer prices. Then, in August, the set of increased tariff rates that will progress through the system will increase again during the fall.”
In the private sector, some of the largest U.S. companies have announced the need to raise prices due to tariffs, including large box retailer Walmart and the world’s largest consumer goods manufacturer Procter and Gamble.
Hornung says that increasing inflation and employment growth could lead to lower interest rates in September, when the Federal Reserve is expected to meet next.
On Wall Street, the market has been actively responding to the report, showing that inflation rates are slightly lower than expected. The Dow Jones industrial average has increased by 1.1%. The S&P 500 is on a 0.8% upward trend, while the Nasdaq also has a 0.8% upward trend.
