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Where’s the Inflation? It’s Not in Stores—Yet

It's one of those enigmas that sometimes frustrate economists and policymakers quite a bit.

The administration under Donald Trump is increasing taxes on imports as an effort to reshape global commerce. While tariffs typically lead to higher costs, one might ask, echoing the famous line from the late Clara Peller, "Where's the inflation?"

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It might be coming, but at a slow pace.

That's how business operates. You can input numerous figures into a spreadsheet and quickly receive responses to queries such as "What is the level of inflation?" However, real-world developments tend to unfold gradually over time.

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Therefore, the Trump administration claims there isn't an actual risk of inflation, and the Federal Reserve ought to lower interest rates. The Fed's federal funds rate stands at 4.25% to 4.5%.

However, critics may point out that the rise in tariffs began only in April, and shipments arriving in the United States could require between two to three weeks to travel from locations like Shanghai to Los Angeles.

Next, it requires time to reach the customer's warehouse, and even more time to arrive at their final location.

If the retailer anticipates that tariffs will increase expenses and purchases stock ahead of the tariff implementation, then prices might not show the additional costs.

Yet.

Expected CPI and PPI data to show limited movement Anticipated mild performance from CPI and PPI releases CPI and PPI figures anticipated to remain quiet Reports on CPI and PPI expected to lack significant impact Moderate outcomes projected for CPI and PPI announcements CPI and PPI updates likely to be unremarkable Outcomes of CPI and PPI reports expected to be low-key CPI and PPI findings forecasted to be relatively calm Potential for muted developments in CPI and PPI reports Forecasts suggest restrained activity in CPI and PPI publications

Therefore, two economic reports will serve as a test of that theory during the week: the Consumer Price Index report, scheduled for release on Tuesday, and the Producer Price Index report, set to come out on Wednesday.

Both are anticipated to demonstrate a slight increase in inflation for June compared to May, but only marginally. According to FactSet, consumer prices are projected to climb by 0.23% over the month and 2.6% annually. When excluding food and energy, the increases are forecasted to reach up to 3% on an annual basis.

The government is gathering substantial customs income, with $27.2 billion collected in June alone, and over $113 billion accumulated throughout the 2024–25 financial year. This fiscal period concludes on September 30th.

Why the lag in affecting the CPI: As likely, retailers are delaying price increases for as long as they can. Toyota ( TM ) is set to increase its prices by approximately $270 per vehicle beginning in July. Walmart ( WMT ) has already increased costs for toys and imported goods, such as bananas.

Bank of America economists anticipate that increasing prices for essential goods will primarily fuel the surge in inflation during June, according to an article published by Morningstar’s Sarah Hansen on Friday. The report mentions "widespread price increases... partly due to tariffs." Additionally, they predict a slight increase in service-related costs, such as those for accommodations, airline tickets, and healthcare services.

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Meanwhile, the Producer Price Index report, scheduled for release on Wednesday, also indicates a rise in costs. This serves as an initial indicator of how consumer inflation could develop. Producing and delivering products requires energy, and the cost of crude oil has increased by almost 20% since its low point in April. However, this is still early in the economic cycle.

Crude closed Friday at $68.45 for each 42-gallon barrel and rose to $68.72 during Sunday night transactions.

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Additional stories to follow Further updates to consider Other news items to monitor More content worth noting Additional coverage to keep an eye on Further information sources to track More developments to observe Additional topics of interest More insights to explore Other reports deserving attention

Weekly jobless claims report. Submitted by Thursday. This reflects the number of workers applying for unemployment benefits from the previous week. It serves as an effective early indicator for economic trends.

The Federal Reserve's Beige Book publication The Fed's beige book document The central bank's Beige Book findings The Federal Reserve's Beige Book summary The monetary authority's Beige Book report The Fed's official Beige Book release The Federal Reserve's quarterly Beige Book update The Beige Book report from the Federal Reserve The Fed's economic survey known as the Beige Book The Beige Book documentation issued by the Federal Reserve . Due by Wednesday afternoon. The narrative report covers all of the Federal Reserve Bank regions and should provide some understanding of the inflationary pressures companies are experiencing and how they are responding.

Home builder confidence. Submitted by the National Association of Home Builders due on Thursday. This report highlights the frustration among developers regarding the current condition of the real estate market. Many builders currently face challenges because interest rates remain fairly elevated, and when paired with persistently high property values, this complicates the sale of newly constructed homes.

Housing starts. Due by Friday morning. This will help determine the level of activity within the new home market. Home building numbers can be challenging since they are estimated. Permits provide a more accurate indicator as they reflect approved projects to begin construction.

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