Biggest takeaways from the government's latest inflation data

Inflation inactive outpacing wages, survey finds

Americans' paychecks inactive not keeping up with inflation, survey finds 03:52

Inflation continued to tally blistery successful July, underlining the Federal Review's dilemma arsenic it looks to little prices for American consumers portion propping up a occupation marketplace that is starting to wobble. 

Prices crossed the U.S. roseate astatine an yearly complaint of 2.6% past month, according to idiosyncratic depletion expenditures information released connected Friday. That's the aforesaid fig arsenic successful June, a motion ostentation remains persistent. Stripping retired volatile nutrient and vigor prices, ostentation successful July really ticked up to 2.9% from a twelvemonth ago, up from 2.8% successful June.

 Read connected for a breakdown of Friday's PCE report.

How are consumers faring?

The latest PCE information shows that user spending roseate 0.5% successful July, suggesting that Americans are continuing to unfastened their wallets adjacent successful the look of economical uncertainty.

But portion radical proceed to spend, galore consumers are progressively having to marque trade-offs connected what they walk their wealth on, Gregory Daco, main economist astatine EY-Parthenon, told CBS MoneyWatch. 

"Consumers are trying to propulsion done — they're doing the champion they can, but they're progressively nether pressure, and truthful they're being much cautious with discretionary outlets," helium said. "They question less. They walk little connected restaurants, walk much cautiously connected transportation."

Such caution tin augur a deeper slump fixed that user spending accounts for astir two-thirds of economical activity. The intimately watched University of Michigan user sentiment survey, released Friday, showed that Americans are progressively acrophobic astir inflation. 

Although ostentation has cooled importantly since peaking successful 2022, it remains stubbornly supra the Fed's 2% yearly target. And consumers proceed to consciousness the symptom successful the signifier of higher prices for immoderate groceries arsenic good arsenic rising energy costs. Another cardinal ostentation gauge — the Consumer Price Index — shows that the terms of java was up 14.8% from a twelvemonth ago, portion beef and ovum costs were 15.5% and 16.4%, respectively. 

Are tariffs impacting inflation?

Not yet. In a affirmative sign, the terms of goods, which are astir susceptible to tariffs than services, cooled somewhat successful July, the PCE information shows, decreasing 0.1% from the period prior. That suggests tariffs person had a minimal interaction connected prices truthful far.

"It's not showing up successful a goods prices, successful the authorities statistic astatine least," Adam Crisafulli, caput of Vital Knowledge, told CBS MoneyWatch.

Still, analysts accidental ostentation could bare its teeth much successful the coming months arsenic U.S. tariffs commencement to trickle done the economy. 

"We proceed to expect tariffs to instrumentality a increasing wound retired of maturation successful existent income and existent user spending," Nancy Vanden Houten, pb U.S. economist astatine Oxford Economics, told investors successful a report. 

A captious question facing the system is whether immoderate tariff-induced ostentation amounts to a one-time boost to prices oregon results successful a much prolonged increase. Fed Chair Jerome Powell laid retired the scenarios successful a speech successful Jackson Hole, Wyoming, earlier this month, noting that adjacent if ostentation does extremity up being a "one-time" scenario, it volition inactive "take clip for tariff increases to enactment their mode done proviso chains and organisation networks."

What does the latest ostentation information mean for a Fed complaint cut?

Most Wall Street analysts deliberation the latest ostentation figures support the Fed connected way to little involvement rates astatine its Sept. 16-17 meeting. 

"Today's numbers connected some the idiosyncratic consumption, expenditure, and income and spending, were close down the mediate of the fairway," said Art Hogan, main marketplace strategist for B. Riley Wealth. "This leaves the doorway wide unfastened for the Fed to chopped rates successful September, and apt again successful October and successful December."

Traders enactment the likelihood of a complaint chopped astatine 87%, according to CME Group's FedWatch tool. 

• Jerome Powell
• Tariffs
• Consumer Price Index
• Inflation
• Federal Reserve