Just like any other soap opera, the middle class family of the 1970’s used to stay glued to it’s television set and see the commercials which promoted consumer goods and hope they could afford them. Nothing has changed, except I have to ask to be honest, do the major networks still produce soap operas? This author has no idea nor do I really care as General Hospital was the big deal when I was a kid so yeah, I remember 1970’s inflation and my mom watching soaps.
God I miss the era of creative, corny commercials that just want to make one go out and consume 2000 empty calories.
Today’s CPI report hit the financial media headlines as expected.
U.S. Inflation Accelerated in June as Trump’s Tariffs Pushed Up Prices
Inflation picks up again in June, rising at 2.7% annual rate
Inflation Rose to 2.7% in June. Pay Attention to Core Numbers
Inflation accelerated in June as the Fed weighs the impact of tariffs in rate cut timing
The big theme of the day? Focus on the core number. So let us all take a dive into the data and see if this “core” inflation number is a big deal or not.
First and foremost the headline data from the Bureau of Labor Statistics published at 8:30 a.m. ET this morning:
CONSUMER PRICE INDEX - JUNE 2025 The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent on a seasonally adjusted basis in June, after rising 0.1 percent in May, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.7 percent before seasonal adjustment. The index for shelter rose 0.2 percent in June and was the primary factor in the all items monthly increase. The energy index rose 0.9 percent in June as the gasoline index increased 1.0 percent over the month. The index for food increased 0.3 percent as the index for food at home rose 0.3 percent and the index for food away from home rose 0.4 percent in June. The index for all items less food and energy rose 0.2 percent in June, following a 0.1-percent increase in May. Indexes that increased over the month include household furnishings and operations, medical care, recreation, apparel, and personal care. The indexes for used cars and trucks, new vehicles, and airline fares were among the major indexes that decreased in June. The all items index rose 2.7 percent for the 12 months ending June, after rising 2.4 percent over the 12 months ending May. The all items less food and energy index rose 2.9 percent over the last 12 months. The energy index decreased 0.8 percent for the 12 months ending June. The food index increased 3.0 percent over the last year.
Interesting, yes. Consequential? Not yet if one is to believe the core data is most important. However the variable month over month data of what consumers use, consume, and have to purchase is somewhat disturbing.
Food at Home: MoM (month over month) up 0.3% YoY (year over year) up 3%
Ground Beef: MoM: 1.5% YoY: 10.5%
Bacon: MoM 0.8% YoY 3.6% (God help us)
Poultry: MoM 0.9% YoY 3.4%
Eggs: MoM -10.8% (hurray) YoY + 27.3% (ahem)
Coffee: MoM 2.2% YoY 13.4% (good thing we are putting tariffs on Brazil)
Electricity: MoM 3.3% YoY 5.8%
Utility(piped gas service): MoM 1.5% YoY 14.2%
Rent of Primary Residence: MoM 0.2% YoY 3.8%
Water, Sewer, and Trash Collection: MoM 0.4% YoY 5.4%
Health Insurance: MoM 0.6% YoY 3.4%
Subscription and rental of video and video games: MoM -0.3% YoY +13.4%
Haircuts and other personal care services: MoM 0.6% YoY 3.8%
Basically inflation is not going down. And despite all the celebrations about “core” inflation minus food and energy, the underlying core rate is still increasing. Ignore the BLS modeling and look at the Sticky CPI as reported by the Atlanta Federal Reserve:
First to answer a question this author has received from readers, I attempt to model this type of data from March of 2009 because that is when the Federal Reserve under Ben Bernanke revised the monetary policy for the Fed to direct interference in the US economy versus passive actions due to the monetary crisis of that era.
If a 0.1% increase seems inconsequential, pay attention to the trend the next 3 months as that will set the course for Fed policy barring Trump firing Jay Powell and pressuring and eventually getting lower Fed Fund rates.
The tariff policies are just now beginning to see a translation from producer and intermediary levels to the consumer as Bloomberg Economist Anna Wong highlighted in her posting on X earlier today:
Unfortunately for the administration and its war on the Fed, this is nothing to sneeze at. The impacts are now going to accelerate and eventually start to show up with the August data in full as production impacts from the steel, aluminum, and auto tariffs filter through as existing inventory evaporates. Remember however, the August data will not show up until September, just before the FOMC meeting.
So while the upper 20% of the ‘K’ do not care about this incidental increase in prices as asset inflation keeps their portfolios ahead of the game, the retirees and working lower 80% of the American population continues to receive the inflation tax with both barrels. Which means as credit sources get exhausted some hard choices for that lowest percentile of the population will make some hard choices which will soon impact the larger economy a lot more than the “experts” estimate.
