Core inflation spikes in July, but tariff price impacts still muted

KEY TAKEAWAYS

A new report from the Labor Department on Tuesday showed core inflation rose to 3.1% in July.
The Mountain West states, including Utah, saw an increase to 2.4%, though it's still below the national rate.
Economists still predict tariffs will affect inflation, but the primary driver behind the increase were service costs.

SALT LAKE CITY — A Tuesday report from the Labor Department shows overall annual inflation held steady in July even as prices on consumer goods and services moved up slightly on a monthly basis.

Impacts from a raft of new international trade tariffs implemented by President Donald Trump are, so far, having only minimal impacts on household budgets.

The Bureau of Labor Statistics' Consumer Price Index for July pegs annual inflation at 2.7%, matching June's annual rate even as prices rose 0.2% on a monthly basis. Core CPI inflation, a metric that strips out volatile food and energy prices, came in at 3.1% last month, the highest since February and up from June's 2.9% annual reading. July's core inflation increased by 0.3% on a monthly basis, marking the biggest increase since January.

Annual CPI inflation for the Mountain West states, which include Utah, was running well below the national rate last month at 2.4%, but saw a significant uptick from June's 1.9% annual rate for the region.

Shelter-related costs in the U.S. rose 0.2% on a monthly basis in July, but the 3.7% annual inflation rate for the category was down slightly from June's 3.8% mark. Shelter-related costs are computed by the Bureau of Labor Statistics using data from new rents, existing lease agreements and a rent-equivalent calculation for owner-occupied properties.

While many economists still predict new trade levies will put upward pressure on inflation over time, the major price increases in July came from services, including shelter costs, which were the primary driver behind the monthly increase for overall inflation in July.

"We have seen moderate inflation over the last year … certainly, prices are not going up nearly as quickly as they were a few years ago," Gus Faucher, senior vice president and chief economist at PNC Financial Services Group, told CNN. "But I do think that consumers are going to start seeing more price increases at the grocery store, at Amazon, things like that."

"Consumers are going to start to feel a little more stretched over the next few months as we see more of the impact of tariffs passed through from businesses to consumers," Faucher added.

Grocery prices inched lower on a monthly basis in July, down 0.1% from June, and annual inflation in the category also fell, coming in at 2.2% last month.

Helping take some of the sting out of summer vacation road trips this year, gasoline prices were down 9.5% in July and dropped by a sizable 2.2% from June.

According to data from AAA, the average price of a gallon of regular in Utah was $3.39 on Tuesday, down from $3.56 per gallon at this time last year but still ahead of the current national average of $3.14.

How are Utahns feeling about the economy?

In statewide online polling conducted July 9-16 by HarrisX for the Deseret News in partnership with the University of Utah's Hinckley Institute of Politics, almost one-half of Utah voters who participated in the survey, 49%, said the economy was on the wrong track versus 40% who believe the nation's economy is headed in the right direction.

When parsed by self-identified party affiliations, 57% of Republican respondents versus 13% of Democrats said the economy was on the right track while 31% of GOP participants told pollsters the country's economy was on the wrong track as did 80% of Democrats.

When asked, "Would you say your personal financial situation is improving, getting worse or staying the same," 26% report their finances are improving, 34% said getting worse and 38% indicated their finances are holding steady.

As for personal finances, 33% of Republicans say they're getting better compared to 20% of Democrats; 24% of Republicans say they're getting worse compared to 34% of Democrats, and 42% of Republicans say they're staying the same compared to 37% of Democrats.

The Key Takeaways for this article were generated with the assistance of large language models and reviewed by our editorial team. The article, itself, is solely human-written.