Key Economic Reports Released Today
This week, two key inflation reports came out. They offer important insights into U.S. price pressures and show that President Trump’s tariffs have had a limited impact so far.
Producer Price Index (PPI) Report – May 2025
The U.S. Bureau of Labor Statistics shared the Producer Price Index for May 2025 on Thursday, June 12. The data shows that wholesale inflation stayed low. The PPI for final demand rose 0.1 percent in May. This was lower than the 0.2 percent that economists expected. This modest increase followed a revised decline of 0.2 percent in April.
Annual PPI Growth
The PPI increased by 2.6 percent over the year ending in May. This is a bit more than April’s 2.5 percent rise and matches what analysts expected. Core PPI, which leaves out food and energy, grew by 3.0 percent. This was lower than the expected 3.1 percent and down from April’s 3.2 percent.
Sector Breakdown
The May PPI increase was driven by several factors:
- Final demand services advanced 0.1 percent, led by a 0.4 percent rise in trade service margins
- Final demand goods rose 0.2 percent
- Transportation and warehousing services declined 0.2 percent
- Airline passenger services fell 1.1 percent, helping to moderate overall price pressures
Consumer Price Index (CPI) Report – May 2025
The Consumer Price Index was released on Wednesday, June 11. It showed inflation rising, but it is still lower than expected. The CPI rose 2.4 percent annually in May, up from a four-year low of 2.3 percent in April. Monthly inflation edged up by 0.1 percent. This is in line with core inflation and falls short of economists’ predictions.
Core Inflation Trends
Core CPI, which leaves out food and energy prices, stayed steady at 2.8 percent each year. Policymakers at the Federal Reserve keep a close eye on this measure. It serves as a key sign of price pressures. The monthly core CPI increase of 0.1 percent was below the expected 0.2 percent rise.
Price Categories
Several categories showed mixed movements in May:
- Increases: Shelter (+0.3%), medical care, motor vehicle insurance (+0.7%), household furnishings
- Decreases: Gasoline (-12% annually), airline fares (-2.7%), used cars and trucks (-0.5%), apparel (-0.4%)
Energy prices helped reduce inflation, as gasoline prices fell 12 percent compared to last year.
Limited Tariff Impact So Far
Many worry about President Trump’s trade policies. However, the inflation reports show that their effect on consumer and wholesale prices has been quite small so far.
Tariff Policy Context
Since Trump returned to office in January, he has put new tariffs in place around the world. There’s a 10 percent tariff on most products, and some goods from certain countries have higher rates. Economists warned that these policies might bring back inflation worries that seemed to be fading.
Current Assessment
Inflation data shows that prices for appliances and toys are rising. The U.S. depends a lot on Chinese imports for these items. Still, the overall impact on households is small. Analysts say companies might hold off on raising prices. They want to see clearer tariff levels first.
Experts warn that tariff effects might take time to show up in the data. Goldman Sachs thinks inflation will rise again in late 2025. Tariffs will drive this change. They expect core PCE to reach 4 percent by June 2026.
Federal Reserve Implications
The mild inflation readings impact monetary policy. As a result, the Federal Reserve is holding the federal funds rate in the 4.25 to 4.50 percent range. Market expectations for rate cuts have gone up a bit. The CME FedWatch tool now shows a 16.5 percent chance of a July rate cut, rising from 14.4 percent.
Fed Chair Jerome Powell is worried about stagflation risks from ongoing tariff hikes. He said these could lead to “a rise in inflation, a slowdown in economic growth, and an increase in unemployment.” The next FOMC meeting is scheduled for June 17-18, 2025.
Market Outlook
While current inflation readings provide some reassurance, economists remain cautious about the outlook. The Organization for Economic Co-operation and Development says U.S. inflation will reach 4 percent by the end of 2025. This is a big rise from where it is now. Price hikes from tariffs may not show in consumer data for a while. So, it’s too early to say there won’t be a price shock.
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