Source: Economics Group of Wells Fargo Bank, N.A.
Summary
Consumer prices rose roughly in line with expectations in July. Headline CPI moderated to a 0.20% gain, keeping the year-over-year rate steady at 2.7%. Excluding food and energy, the core CPI was hotter, rising 0.32% over the month and pushing the year-over-year rate up to 3.1%—its highest year-ago reading since February. The details show tariff-related price increases continuing to seep into the economy, with core goods prices rising 0.2% in July amid additional increases for heavily imported items, such as household furnishings and recreational goods. Core services inflation picked up a stronger-than-expected 0.4% as a rebound in airfares and a strengthening in medical care services prices overtook the gradual moderation in primary shelter cost growth. Yet, with medical care and airfares not serving as source data for the PCE deflator, we currently estimate the core PCE index rose a softer 0.22% in July.