UBS Economics-US Economic Perspectives _July CPI Preview Tariffs showing ...-117058123

ab5 August 2025Global ResearchUS Economic PerspectivesJuly CPI Preview: Tariffs showing through Tariff effect should show through to core CPI as offsets smaller in July
The June CPI appeared to show noteworthy tariff effects on prices for core non-transportation goods. However, the impact of the upward push from tariffs was mostly offset by seasonal adjustment issues and less robust moves in prices for transportation goods and non-rent services. Those factors offsetting the tariffs are likely to be smaller in next week's July CPI and consequently we expect a larger core CPI increase in July than we saw in June.Additional July price data available in next couple of days
As of publication time we have not yet received price data for the last two weeks of July from Nielsen's collection of grocery, drug, and convenience stores, nor have we received the Adobe Digital Price Index for July.
These two additional pieces of data will be important to gauge the pass-through of tariff effects, and incorporating them into our forecast could alter our projection of the July CPI increase for the components food at home and core goods, as well as the main headline and core CPI aggregates.
In the next couple of days we will also receive data on airfares and the consumer services output price diffusion index. Headline CPI: UBS US Econ 0.24%, UBS Nowcast 0.24%, consensus 0.21%
We project next Tuesday's (July 12) report to show the CPI rose around 24bp seasonally-adjusted in July, a little below the 29bp increase in June, as food and energy prices slow compared to June, but core prices accelerate.
Our July headline CPI forecast of +24bp is only slightly above the current Bloomberg consensus average forecast (21bp) and in line with the projection from the models of our Nowcasting team (24bp).
Our projected not-seasonally-adjusted headline CPI level, at 323.257, is only about 1bp above recent CPI swaps fixings.
Not-seasonally-adjusted gasoline prices have been little changed in recent weeks, suggesting a decent decline on a seasonally-adjusted basis (around -2¼%). At this point food at home prices are also looking soft.
We project 12-month headline CPI inflation to rise to 2.77% in July from 2.67% in June and a post-pandemic low of 2.31% in April.Core CPI: UBS US Econ 0.35%, UBS Nowcast 0.33%, consensus 0.27%
We project the July core CPI will show a 35bp seasonally adjusted increase, which would be notably faster than the 23bp increase in June and above any month since the surprisingly sharp 45bp increase in January.
A bit more than half of the pick-up from June is not real, but instead a result of less downward push from biased seasonal factors. We believe the main pandemic years of 2020, 2021, and 2022 are not useful in determining the underlying seasonal pattern relevant for this year, and the BLS procedure of including most of the data from the pandemic years in the seasonal adjustment procedure has likely biased down the seasonally-adjusted mont