US inflation report: Travel spending down, cost of goods up
The latest US inflation report for June showed a decrease in travel spending and an increase in the cost of goods. Despite muted wholesale inflation, the drop in travel services masked the rise in goods prices. The report reflects the impact of tariffs on the economy.
US wholesale inflation in June remained steady, despite President Donald Trump's tariffs. The Producer Price Index showed no change from May, with a 2.3% annual inflation rate. Tariffs raised prices of goods, but weak demand kept inflation contained. Core PPI, excluding food and energy, also remained flat.
The report revealed a drop in travel and services prices, masking an increase in goods costs. The Consumer Price Index, on the other hand, showed higher prices in June, partly due to tariffs. This complex economic scenario poses challenges for businesses, consumers, and the central bank.
Chief economist Joe Brusuelas called the report a 'head fake,' citing a decline in travel services prices. Despite rising gas prices, falling services costs drove the index down. Businesses may face pressure to pass on higher costs to consumers, but demand uncertainty could limit their pricing power.
PPI serves as an indicator of potential future price changes for consumers.
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