When will the impact of tariffs become apparent? These two U.S. data points will be closely watched next week
Market expectations indicate that the core CPI in the U.S. for June will see the largest month-on-month increase in five months, and the year-on-year increase will rebound for the first time since January. Meanwhile, retail sales are expected to slightly recover after declining for two consecutive months. Although the June data may only reflect "limited tariff transmission," an increasing number of analysts anticipate that as corporate pricing gradually adjusts in the second half of the year, inflationary pressures will exhibit a cumulative effect
As companies gradually pass higher import costs onto consumers, U.S. inflation, after months of silence, may be quietly warming up. Next week, attention will be focused on the release of consumer inflation and retail data.
The tariff transmission effect begins to show, inflation pressure intensifies
According to a Bloomberg survey of analysts, in June, the U.S. core CPI (excluding food and energy) is expected to rise 0.3% month-on-month, the highest increase in five months, while in May, this indicator only saw a slight increase of 0.1%. More notably, the year-on-year increase in core inflation is expected to rebound for the first time since January, reaching 2.9%.
This inflation report will be released next Tuesday Eastern Time, coinciding with the market's attempt to clarify whether Trump's reciprocal tariffs have begun to have a substantial impact on domestic prices in the U.S.
Although June's data may only reflect "limited tariff transmission," an increasing number of analysts expect that as companies gradually adjust pricing in the second half of the year, inflation pressure will show a cumulative effect.
"We believe the composition of price changes will still be similar to May: there is some tariff transmission in goods, but service prices remain soft," the Bloomberg Economics research team stated. They pointed out that from the online prices captured, categories such as appliances and furniture are strengthening, while services like airfare and used cars continue to be weak.
However, the "transmission path" of price increases is not smooth. Faced with a cooling job market and slowing wage growth, U.S. consumers are showing higher price sensitivity, and many retailers are still weighing whether to dare to raise prices comprehensively. This is also one of the reasons why, despite rising import costs, the inflation rebound remains moderate.
This tug-of-war between "corporate pricing and consumer resilience" has made the Federal Reserve's policy judgment more complex. Although some investors expect interest rate cuts within the year, Fed officials are still watching to see if a more obvious upward trend in inflation will emerge. The Fed's next policy meeting will be held on July 29-30, and this inflation report will undoubtedly become an important reference.
Another key data point—retail sales
Following the CPI, the U.S. Department of Commerce will release June retail sales data on Thursday. While this data mainly reflects spending on goods, it will provide more clues for assessing economic growth in the second quarter.
The market generally expects that after two consecutive months of decline, June retail sales will see a slight rebound. Analysts point out that weakening consumer power is occurring simultaneously with a cooling job market. If this data continues to perform flatly, it will provide more evidence for the judgment that "the U.S. economy is soft landing."
Overall, the CPI and retail sales data will jointly reveal the current crossroads of inflation and growth in the U.S. economy. Especially as tariff policies gradually take effect, the market is eager to know: when will these policies fully reflect in inflation?
