UBS Economics-US Economic Perspectives _August CPI recap Few surprises_ D...-117733083

ab11 September 2025Global ResearchUS Economic PerspectivesAugust CPI recap: Few surprisesTwo takeaways: Tariffs slowly appearing; Inflation gradually rising
There were few surprises in today's CPI release: As expected, the seasonally-adjusted core CPI rose similarly to last month; owners' equivalent rent (OER) picked up; and the headline CPI increase was a little above the core CPI increase.
The tariff pass-through has been moderate, but clear: Core CPI goods prices excluding transportation rose only 12bp in August following stronger increases in the prior two months. This was the fifth month in a row of price increases in that category, which is the one where we expect to see the initial tariff impacts. Continual price increase for core non-transportation goods has been unusual outside of the pandemic, and the 12-month change has picked up 1¼ pp since the implementation of the tariffs. With more tariffs having been implemented in early August, and the strong Adobe Digital Price Index for online prices in August, we expect core CPI goods prices to continue to pick up through at least the end of this year.
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 61bp from April (to 2.92% currently) and core CPI inflation up 43bp (to 3.11%). Headline CPI +0.38%: 12-month inflation rises to 2.92%
The headline CPI increased 38bp (seasonally-adjusted) in August — 1bp above our expectations and 5bp above the Bloomberg consensus average (UBS Econ projection +0.37%, UBS Evidence Lab Nowcast +0.31%, Bloomberg consensus average +0.33%).
On a 12-month change basis, headline CPI inflation has risen in each of the past four months: from a post-pandemic low of 2.31% in April to 2.70% in July then to 2.92% in today's report for August. We expect that headline inflation will surpass 3% in next month's release and continue to trend up for some time.
After falling in July, prices for gasoline and other energy commodities rose 1.7% in August on a seasonally-adjusted basis. On a not-seasonally-adjusted basis gasoline prices have seen little net price change in recent months, but gasoline and other energy goods prices are 6% lower than 12 months ago. Daily gasoline prices through early September suggest a strong increase in seasonally-adjusted gasoline and other energy commodity prices is likely in next month's September CPI.
Prices for food at home rose 58 bp, a sharp reversal of the decline last month, and not too far from our 65bp projection based on grocery store data from Nielsen. Smoothing through the July weakness and the August strength suggests a continuation of the gradual rise in food prices that we have been seeing over the past six months. Meanwhile prices from food away from home, which we consider one of the better single series for tracking the current trend in inflation, rose 25b