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Weekly Update 07/18/2025: US Inflation Rises Less Than Expected in June

Insights
  • JP Morgan releases earnings beating expectations on strong trading and investment banking results
  • Wells Fargo releases earnings beating expectations but stock pulls back on lowered guidance
  • Omnicom releases earnings beating expectations; FTC approves Interpublic acquisition
  • Johnson & Johnson releases earnings beating analysts’ forecasts while raising full year guidance
  • Boeing Indonesia to potentially acquire 50 Boeing planes as part of trade deal
  • Kinder Morgan releases earnings meeting profit expectations while forecasting strong future demand for natural gas
  • Elevance releases earnings missing estimates while lowering guidance; shares decline
  • ABB releases earnings posting a solid beat lifting shares
  • Travelers releases earnings posting solid profit beat and exceeding analysts’ forecasts on revenues

Domestic Economic News

Underlying US inflation rose in June by less than expected for a fifth month, as lower car prices helped offset gains in other goods exposed to tariffs. The consumer price index, excluding the often volatile food and energy categories, increased 0.2% from May, according to Bureau of Labor Statistics data out Tuesday. On an annual basis, it advanced 2.9%. Goods prices, excluding food and energy commodities, rose 0.2% after stalling in the prior month. Categories that are more exposed to tariffs, including toys, furniture, appliances and apparel, showed strength, suggesting companies are starting to pass higher import costs on to consumers. Meantime, prices of new and used cars declined. The weaker-than-expected number could draw even greater calls from Trump for the Federal Reserve to lower interest rates. While some officials have expressed willingness to cut rates when the central bank meets in two weeks, policymakers generally are still divided as to whether tariffs will cause a one-time price shock or something more persistent and will probably leave rates unchanged for now. Services prices excluding energy climbed 0.3%. Within services, one of the key drivers of inflation in recent years has been its largest category: housing. Shelter prices decelerated, dragged down by lower hotel prices. Another services gauge closely tracked by the Fed, which strips out housing and energy costs, picked up to 0.2%, including a big gain in hospital services. While central bankers have stressed the importance of looking at such a metric when assessing the overall inflation trajectory, they compute it based on a separate index. That measure — known as the personal consumption expenditures price index — doesn’t put as much weight on shelter as the CPI, which helps explain why it’s trending closer to the Fed’s 2% target.

US wholesale inflation moderated in June as a sharp decline in the costs of travel-related services blunted a pickup in goods prices. The producer price index was unchanged from a month earlier, after an upwardly revised 0.3% gain in May, according to a Bureau of Labor Statistics report released Wednesday. US wholesale prices rose 2.3% from a year earlier, the least since September. Excluding food, energy and trade services, the PPI was also flat. It increased 2.5% from June of last year — the smallest annual advance since late 2023. The PPI report follows June consumer price data that showed higher tariffs are filtering through into a variety of categories that include household furnishings, appliances and recreational goods. While inflation has been mild so far this year, many economists expect it to gradually build as more companies attempt to offset higher trade costs. The latest wholesale price data suggest manufacturers are so far proceeding cautiously on the extent to which they can pass through higher US tariffs to their customers. The data showed wholesaler and retailer margins were little changed in June after surging in May.

Economists pay close attention to the PPI report because some of its components are used to calculate the Federal Reserve’s preferred measure of inflation: the personal consumption expenditures price index. Those categories, which include airfares, were mixed in June. Portfolio management fees increased, reflecting higher stock prices. Health care-related categories were generally muted. The PCE report will be published later this month. Fed policymakers are widely expected to keep interest rates unchanged at their July meeting as they await more clarity on the impact from US trade policy. President Donald Trump’s frequent trade-policy adjustments, including recent announcements of higher tariffs on Mexico, Canada and copper, are making it difficult for companies to ascertain the cost impact on their operations. Like the CPI report, the PPI data also indicated some tariff-related inflation. Consumer durable goods costs rose 0.4% after a 0.5% gain in the prior month, the biggest back-to-back gain in about three years. The PPI report showed the costs of processed goods for intermediate demand, which reflect prices earlier in the production pipeline, edged up. Unprocessed goods prices increased for the first time in four months.

US industrial production rose in June, boosted by a jump in utility output and a modest gain in manufacturing. The 0.3% increase in production at factories, mines and utilities followed little change a month earlier, Federal Reserve data showed Wednesday. Output at utilities climbed 2.8%, while mining declined. Manufacturing output, which accounts for three-fourths of total industrial production, rose 0.1% after an upwardly revised 0.3% May increase. Excluding autos, factory output climbed 0.3%, the most in three months and reflecting a broad pickup across categories. The June figures wrap up a 2.1% increase in factory output for the quarter, a moderate slowdown from the fastest growth in manufacturing since the end of 2021. The gain in factory output last month reflected increased production of commercial aircraft, machinery, furniture and primary metals, according to the Fed. By market group, output of construction and business supplies picked up. Business equipment production rose at a slower pace.

US retail sales rebounded in June in a broad advance, potentially tempering some concerns about a retrenchment in consumer spending. The value of retail purchases, not adjusted for inflation, increased 0.6% after declines in the prior two months, Commerce Department data showed Thursday. That exceeded nearly all estimates in a Bloomberg survey of economists. Excluding cars, sales climbed 0.5%. Ten out of 13 categories posted increases, surprisingly fueled by motor vehicle sales, which climbed after back-to-back declines. Administrative data showed car sales fell in June and prices for new and used vehicles were down in the latest inflation data, defying economists’ expectations for autos to weigh on the headline retail figure. Thursday’s report offers some relief amid mounting anxiety around the health of the consumer. Americans have been largely pessimistic on the economy and their finances this year as tariffs threaten to worsen a years-long cost-of-living crunch, though sentiment has rebounded somewhat recently.

Applications for US unemployment benefits declined for a fifth straight week to the lowest level since mid-April, showing a resilient job market. First-time jobless claims decreased by 7,000 to 221,000 in the week ended July 12. The median forecast in a Bloomberg survey of economists called for 233,000 applications. Continuing claims, a proxy for the number of people receiving benefits, were little changed at 1.96 million in the previous week that included Independence Day, according to Labor Department data released Thursday.

Interest Rate Insight and the Fed

Federal Reserve Bank of Cleveland President Beth Hammack said she wants to see inflation lowered further before she’d support a cut in interest rates. “We’re not there yet on the inflation side of the mandate,” Hammack said Monday in an interview with Fox Business News. “I think it’s important that we wait and see how all the new policies that have been put forward are going to impact inflation.” The Fed is widely expected to hold interest rates steady again when it meets July 29-30 in Washington. Two policymakers have suggested they might support a cut at that meeting, but most others have signaled they want more time to assess the impact of tariffs on inflation.

Impactful International News

Canada’s finance minister signaled that any trade deal with the US is likely to include at least some tariffs, and repeated that the country’s dairy and poultry protections won’t be on the table during negotiations. “There’s not evidence to suggest that you can have a trade deal with the US without tariffs,” Finance Minister François-Philippe Champagne said Thursday in an interview with Bloomberg Television. The comments underscore a shift in expectations within Prime Minister Mark Carney’s government. Until recently, Canada’s stated goal was to try to get all of US President Donald Trump’s tariffs removed. Now, the focus appears to have shifted to reducing tariff levels and carving out as many exceptions as possible. So far, the government has responded to many of Trump’s key grievances about Canada. Carney’s administration suspended its digital service tax targeted at technology firms and boosted spending for its military and border control. Still, the country currently faces levies on its auto, steel and aluminum exports, and Trump has threatened a 35% rate on some other goods by Aug. 1 unless there’s a negotiated deal. Carney said this week he expects those talks will “intensify” as the date draws nearer. “We are in a world where, there’ll be some form, sadly, of trade restrictions that have been put in place and some level of tariffs,” Champagne said during the interview in South Africa, where he’s attending Group of 20 meetings. “From our perspective, for us, we are going to double down to make sure that we can get the best possible deal,” he added. Carney has repeatedly said that the country’s protections on dairy and other agricultural sectors — which place limits on the amount of tariff-free imports from US producers — are non-negotiable. The system is known as supply management. “We’ve been clear from the get go that supply management is off the table,” Champagne said.

Company Events

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