U.S. Inflation didn’t explode in June, but if you look closely, the warning lights are flashing. Higher tariffs are beginning to creep into the price tags of everyday goods, and economists say this could be just the beginning of a broader inflation resurgence.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
- Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week.
The Consumer Price Index rose to 2.7% in June from 2.4% in May. Core inflation, which strips out food and energy, ticked up to 2.9%. On the wholesale side, the Producer Price Index was flat month over month, but the Bureau of Labor Statistics revised May’s figures upward and noted that finished goods prices posted their largest monthly gain since February.
That increase is no coincidence. It reflects what Federal Reserve officials are now openly acknowledging: the early effects of President Trump’s new round of tariffs are finally showing up in the data.
Higher Prices Hit the Shelves
From furniture and toys to sports equipment and clothing, price tags are getting heavier. An index tracking household furnishing costs jumped 1% in June, while apparel prices, after months of declines, suddenly rose 0.4%. The cost of recreation also edged higher. These moves are happening broadly across categories, and that is a sign that companies are beginning to pass tariff costs directly onto consumers.
That shift challenges the narrative that tariffs haven’t filtered through to consumers. J.P. Morgan (JPM) economist Michael Hanson points out that prices for several core goods are rising at annualized rates north of 10%. Omair Sharif of Inflation Insights says nearly all core goods, aside from autos, saw price increases in June. According to TS Lombard’s Freya Beamish, one-quarter of tariffs in effect last month were passed through to buyers, up from just 15% in May.
What’s Holding Prices Back for Now
Several temporary forces are holding down inflation headlines, at least for the time being. One is the consumer. With prices rising and budgets stretched, Americans are bargain hunting. Businesses report more resistance to price hikes, and the Fed’s Beige Book notes falling profit margins across the board.
Vehicle prices are also falling, at least for the moment. Used car prices dropped 0.7% in June, while new cars dipped 0.3%. But analysts expect those declines to reverse as inventory that was stockpiled before the tariffs gets depleted. That shift could happen by August.
Hotel rates and airfares are also trending lower. However, that may not last. Airlines like Delta (DAL) are planning to cut capacity, which could stabilize or even lift prices in the coming months. If that happens, it would remove one of the few deflationary pressures currently helping to keep core inflation in check.
The Underlying Forces Are Still Inflationary
Zoom out and the trend is clear. Goods inflation is returning, and the tariff-driven pressures are gaining traction. Durable consumer goods prices climbed 0.4% in June, extending May’s 0.5% increase. While services inflation helped offset that rise for now, economists warn that could change if travel and transport costs pick up again in the second half of the year.
The consensus among many economists and investors is this: they are not just waiting for inflation to moderate. They are waiting for it to accelerate.
Even if Trump eases some of his so-called “Liberation Day” tariffs later this year, analysts expect inflation to hit 3% before 2025 is out. Additional tariffs remain on the table, so the current ripple of price increases could swell into a sustained surge that hits consumers harder in the months ahead.
Follow Trump’s social media posts and the stocks that they could impact with TipRanks’ Trump Dashboard.
