Inflation picks up slightly

Inflation picked up in June, a potential sign that companies are starting to pass off tariff costs onto customers. The consumer price index, a broad-based measure of goods and services costs, increased 0.3% on the month, putting the 12-month inflation rate at 2.7%, the Bureau of Labor Statistics reported Tuesday.

The numbers were right in line with the Dow Jones consensus, though the annual rate is the highest since February and still above the Federal Reserve’s 2% target. Excluding volatile food and energy prices, core inflation picked up 0.2% on the month, with the annual rate moving to 2.9%, with the annual rate in line with estimates. The monthly level was slightly below the outlook for a 0.3% gain.

Before June, inflation had been on a generally downward slope for the year, with the headline CPI at a 3% annual rate back in January and progressing gradually slower in the subsequent months despite fears that President Trump’s trade war would drive prices higher.

While the evidence in June was mixed on how much influence tariffs had over prices, there were signs that the duties are having an impact. Vehicle prices fell on the month, with prices on new vehicles down 0.3% and used car and trucks tumbling 0.7%. However, tariff-sensitive apparel prices rose 0.4%. Household furnishings, which also are influenced by tariffs, increased 1% for the month.

Food prices increased 0.3% for the month, putting the annual gain at 3%, while energy prices reversed a loss in May and rose 0.9%, though they are still down marginally from a year ago. Medical care services were up 0.6%, while transportation services edged higher by 0.2%.

Amid the previously muted inflation ratings, President Trump has been urging the Federal Reserve to lower interest rates, which it has not done since December. The president has insisted that tariffs are not aggravating inflation, and has contended that the Fed’s refusal to ease is raising the costs the US has to pay on its burgeoning debt and deficit problem.

The economy is still in quite a stable position, both growth and inflation wise, and the US economy continues to outperform its European counterparts.