US prices continued to rise in July, according to key economic data released on Tuesday, as Donald Trump’s international tariffs shakeup started to impact consumer costs.
Prices were 2.7% higher last month compared with a year ago, according to the consumer price index (CPI), which measures the prices of a basket of goods and services. Though inflation dipped down in the spring, the annualized inflation rate jumped up 0.4% since April.
Though the inflation rate stayed stable between June and July, core inflation, which excludes the volatile energy and food industries, went up 3.1% over the last month – a higher pace than what was seen in 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.
The report is the latest to show that the US economy is experiencing some turbulence from Trump’s unparalleled shakeup of US trading policy, despite insistence from Republicans that the economy is “firing on all cylinders”.
On top of a 10% universal tariff on all imports, Trump has set higher tariffs for dozens of countries, including the US’s top trading partners. On Monday, hours before a midnight deadline, Trump delayed enacting steep tariffs on China for another 90 days while negotiations continue.
Although many of these tariffs only went into effect 7 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. Some retailers have been stocking up their inventory to delay the impact of tariffs and keep prices stable. But the jump in prices suggests that companies have started to pass down costs to customers, as leaders of companies like Walmart, Nike and Macy’s have said would happen.
Tariffs have also hit the labor market harder than economists had anticipated. Data released earlier this month dramatically revised down job figures that initially showed a healthy job market. The government had reported 291,000 jobs were added to the economy in May and June, but the revision brought the total down to 33,000.
The increase in prices and the shrinking labor market has thrown the US Federal Reserve into a tight spot. The Fed’s twin mandate is to maximise employment while keeping inflation in check.
Trump has lambasted the central bank, arguing it needs to cut rates interest rates in order to spur growth. But Fed officials have refrained from a rate adjustment, citing uncertainty about the impact of Trump’s tariffs on prices.
Trump has spent the last few months directing his ire at economic officials – first at the Fed, and now at the Bureau of Labor Statistics (BLS), which collects and reports economic data. Just hours after July’s job figures report showed a sluggish month of job growth, Trump fired Erika McEntarfer, the commissioner of BLS. Citing no evidence, Trump claimed that the job figures “were RIGGEDOn Wednesday, he nominated economist EJ Antoni, longtime critic of the BLS, to oversee the department.
After the latest inflation figures were released, Trump claimed: “It has been proven, that even at this late stage, Tariffs have not caused Inflation, or any other problems for America, other than massive amounts of CASH pouring into our Treasury’s coffers.”
The president also, once again, attacked Fed chair Jerome Powell and suggested he might sue Powell over costly renovations to the Fed’s buildings.
“Jerome ‘Too Late’ Powell must NOW lower the rate,” Trump wrote on his social media platform, Truth Social. “I am, though, considering allowing a major lawsuit against Powell to proceed because of the horrible, and grossly incompetent, job he has done in managing the construction of the Fed Buildings.”
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