The U.S. July CPI rose 2.7% year-on-year, with core CPI growth reaching the highest level in two months

The U.S. July CPI data shows that inflationary pressures remain relatively mild, and the market's concerns about tariffs driving inflation sharply upward have not materialized. The overall CPI rose by 0.2% month-on-month, in line with market expectations, while the year-on-year increase was 2.7%, lower than the expected 2.8%. The core inflation rate rose to its highest level since February, mainly driven by rising service prices.

On August 12, the U.S. Bureau of Labor Statistics released data showing:

• U.S. July CPI year-on-year 2.7%, expected 2.8%, previous value 2.7%.

• U.S. July CPI month-on-month 0.2%, expected 0.2%, previous value 0.3%.
• U.S. July core CPI year-on-year 3.1%, expected 3%, previous value 2.9%.

• U.S. July core CPI month-on-month 0.3%, expected 0.3%, previous value 0.2%.

Mild Inflation Pressure, Service Prices Drive Inflation Rebound

The data shows that the U.S. July CPI rose by 0.2% month-on-month, slowing from 0.3% in June. The year-on-year increase of 2.7% is the same as June but lower than the market's general expectation of 2.8%. The core CPI performance is relatively hot. The month-on-month increase of 0.3% is higher than June's 0.2%, and the year-on-year increase of 3.1% exceeds expectations, reaching the highest level since February.

Service prices have become the main factor driving the rise in inflation. The "super core inflation" (which excludes housing service inflation) is regarded as a key indicator for measuring potential inflation trends, with a year-on-year growth rate of 3.59% and a month-on-month growth rate of 0.55%, both the highest levels since February and January of this year. Notably, the rise in transportation costs is particularly prominent.

Specifically, several service items saw significant price increases:

• The healthcare index rose by 0.7% month-on-month, continuing the 0.5% increase in June. Among them, dental service prices surged by 2.6% month-on-month.
• The airfare price index rebounded significantly in July, rising by 4.0% month-on-month after a slight decline of 0.1% in June.
• The entertainment index and the household furnishings and operations index both rose by 0.4% month-on-month.

In contrast, the price increase of goods excluding food and energy is relatively mild, indicating that commodity inflation pressures have eased.

Market Reaction

After the data was released, traders raised their bets on a rate cut by the Federal Reserve in September. The three major U.S. stock index futures surged briefly. Nasdaq futures rose 0.41% intraday, S&P 500 index futures increased by 0.36%, and Dow futures climbed 0.44%.

U.S. Treasury yields fell briefly, with the 2-year Treasury yield down nearly 5 basis points; the U.S. dollar index dipped briefly, down 0.22% intraday. Spot gold surged briefly to a high of $3,354 per ounce before significantly retreating, currently reported at $3,349 per ounce.

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