The overall CPI in the U.S. for June is mild, but the "tariff shadow" has begun to emerge
The impact of tariffs is quietly fermenting—imported goods prices continue to rise, coupled with cost transmission in specific areas, laying the groundwork for inflation risks. JP Morgan warns that as tariff pressures spread to a broader range of goods, price pressures will further intensify in the coming months. Meanwhile, the Federal Reserve may continue to hold its position, waiting for clearer signals regarding inflation and employment prospects
The overall performance of the U.S. inflation data in June was mild, but under the calm surface, there are undercurrents.
According to news from the Chasing Wind Trading Desk, JP Morgan's latest research report shows that although the overall Consumer Price Index (CPI) in June performed moderately, the price transmission effect of tariffs on specific categories of goods is continuing to intensify.
Data released by the U.S. Bureau of Labor Statistics shows that the overall CPI in June rose by 0.3% month-on-month, with a year-on-year increase of 2.7%, reaching a four-month high. The core CPI rose by 0.23% month-on-month, with a year-on-year increase of 2.9%, slightly below expectations.
The weak performance of the vehicle and travel-related industries continues to drag down inflation. However, imported goods are showing significant upward pressure. JP Morgan analyst Michael S. Hanson pointed out that these pressures are "clearly attributable to tariffs" and will further intensify in the coming months.
This counteracting price dynamic may lead the Federal Reserve to maintain a wait-and-see attitude until more clear signals regarding the relative risks to inflation and the labor market outlook are obtained.
Tariff Transmission Effects Gradually Emerge
According to the JP Morgan report, although prices in the vehicle and travel-related industries continue to be weak, the upward pressure on imported goods prices is becoming increasingly evident.
The report shows that various goods, including household appliances, curtains and flooring, sports goods, and other household and entertainment products, are seeing three-month increases approaching or even exceeding an annualized level of 10%. JP Morgan's analysis states:
In recent months, a large share of imported goods, including consumer electronics, home goods, and leisure products, has consistently shown upward pressure, refuting the argument that tariffs have not yet been transmitted to consumer prices... As more companies exhaust their pre-stocked inventories and decide not to further compress profit margins, these tariff-related pressures will intensify and spread in the coming months.
Other components of the June CPI exceeded expectations, with healthcare CPI rising by 0.5%, and clothing prices also jumping by 0.4% last month, reversing the decline in May.
Prices in the Automotive and Travel Industries Remain Weak
Vehicle prices continue to be a drag on inflation. In June, new car prices fell by 0.3%, and used car prices declined by 0.7%. Although JP Morgan's tracking of industry data indicates that new car prices should see a slight increase, CPI data has again shown a decline.
The travel-related industry also shows signs of weakness. Accommodation prices are again below industry data expectations, and the increase in air ticket prices in June is also lower than predictions based on high-frequency travel booking data.
JP Morgan analysis believes that the weak trends in industries such as automotive and tourism will gradually return to normal and will rise in tandem with other goods, pushing inflation higher in the coming months.
We still believe that during the spring and early summer, the special weakness in several key sub-items dragged down the CPI. As these factors normalize, they will combine with rising import goods prices to drive significant strengthening in inflation readings in the coming months.
Federal Reserve's wait-and-see attitude may continue
In the face of this structurally differentiated inflation pattern, the Federal Reserve may continue to maintain a cautious stance. JP Morgan stated:
These offsetting price dynamics (with risks still skewed to the upside) may keep the Federal Reserve on hold until it has a clearer grasp of the relative risks to inflation and the labor market outlook. On this point, we currently predict a slightly stronger month-on-month increase in the core PCE price index for June, reaching 0.28% (up 2.7% year-on-year); we plan to revise this forecast after the producer price index (PPI) is released tomorrow.
The report points out that strengthening core commodity prices are pushing up this tracking estimate, and trade policies still pose upside risks, considering planned additional industry tariffs and potential measures to impose higher tariffs on multiple trading partners before August 1.
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