UBS Economics-US Economic Perspectives _July CPI recap Strong, but less t...-117215169

ab12 August 2025Global ResearchUS Economic PerspectivesJuly CPI recap: Strong, but less tariff impactTwo takeaways: Tariffs appearing, Inflation rising
The seasonally-adjusted core CPI rose strongly today as, unlike June, the pass-through of the tariffs was not offset by seasonal factors distortions in the aftermath of the pandemic and falling prices for used cars. Core CPI goods prices excluding transportation rose 20bp in July following a 55bp increase in June, which was their largest increase since core CPI inflation was running at 6% in early 2022. Core goods excluding transportation have now risen four months in row — an unusual occurrence outside of the early 2021 to early 2023 inflation surge.
12-month inflation, which abstracts from seasonal adjustment issues and smoothes through some of the monthly noise, has moved off its spring post-pandemic lows and is now rising with headline CPI inflation up 39bp from April and core CPI inflation up 38bp. Headline CPI 0.20%: 12-month inflation rises to 2.70%
The headline CPI increased 20bp (seasonally-adjusted) in July — 5 bp below our expectations and 3bp below the Bloomberg consensus average (UBS Econ projection +0.25%, UBS Nowcast +0.24%, Bloomberg consensus average +0.23%).
On a 12-month change basis, headline CPI inflation has risen each of the past few months: from a post-pandemic low of 2.31% in April to 2.35% in May to 2.67% in June then to 2.70% in today's report for July. If current tariffs are maintained and the economy does not slip into a notable recession we expect that headline inflation will continue to trend up in coming months and surpass 3% in the autumn.
After rising in June, prices for gasoline and other energy commodities fell again in July on a seasonally-adjusted basis — the fifth decline in the past six months. Gasoline and other energy goods prices are 9% lower than 12 months ago. Daily gasoline prices through early August suggest an increase in seasonally-adjusted gasoline and other energy commodity prices is likely in next month's August CPI.
Prices for food at home fell 12bp as prices for eggs continued to decline in the aftermath of the avian flu virus. Meanwhile prices from food away from home, which we consider one of the better single series for tracking the current trend in inflation, rose 28bp —a little above their pre-pandemic pace (23bp). Core CPI +0.32%: 12-month core inflation at 3.06%
Core CPI prices rose 32bp seasonally-adjusted in July, in between our expectations and the Bloomberg consensus average (UBS Econ projection 0.35%, UBS Big Data 0.33%, Bloomberg consensus average 0.29%). A reduced influence of distorted seasonal adjustment factors account for the majority of the larger core CPI increase in July (+32bp) compared to June (+23bp).
After running at 2.78% or 2.79% from March to May and 2.93% in June, 12-month core CPI inflation rose to 3.06% in July and we expect that 12-month inflation is likely to rise further in coming month