U.S. July CPI: Headline Cools to 0.2% M/M; Core Firms to 0.3%

The July Consumer Price Index (CPI) rose 0.2% m/m and 2.7% y/y. Core CPI (ex-food & energy) advanced 0.3% m/m and 3.1% y/y, underscoring sticky services inflation even as energy prices fell. Our accompanying chart (blue = July, red = June) shows category-level moves; positive bars indicate price increases, negative bars indicate declines.

What moved:

• Energy declined 1.1% m/m (gasoline −2.2%), offsetting strength elsewhere.

• Services inflation broadened: medical care, airline fares, recreation, and household operations all rose.

• Vehicles: Used cars & trucks increased 0.5% m/m; new vehicles were flat.

• Communication declined; shelter rose 0.2% m/m and remains the largest driver of the monthly gain.

Why it matters:

The mix—soft energy, firmer core—keeps the disinflation trend intact but highlights sticky domestic services that historically ease only with slower demand. Markets now weigh how many rate cuts the Fed can justify into year-end given a 3.1% core pace.

Data quality in focus:

U.S. official statistics face operational strain. According to the Wall Street Journal, staff shortages led the Bureau of Labor Statistics (BLS) to skip price checks in 3 of 75 cities, and falling survey response rates have increased reliance on imputations/estimates in recent months.

Leadership and methodology debate:

President Trump’s nominee to lead the BLS, E.J. Antoni, has publicly suggested pausing monthly jobs reports in favor of quarterly releases until data-collection issues are resolved—intensifying the discussion around timeliness vs. accuracy of U.S. macro data. Confirmation is pending.

Trade/tariff backdrop for prices:

The U.S. Chamber of Commerce estimates ~236,000 small U.S. importers (fewer than 500 employees) bought >$868B of goods abroad in 2023 and now face an annual tariff burden of roughly $200B under recently announced country-specific levies (10%–50%), alongside higher customs-bond requirements and added red tape—potential upstream cost pressures for select categories.

Our take:

• Near term: Headline disinflation continues, but core services remain firm.

• Risks: Persistent shelter/services, tariff pass-through, and data-collection uncertainty.

• Watch next: Fed communications on the balance between softer headline inflation and sticky core; any BLS policy/process updates; tariff implementation effects on importer costs and consumer prices.