The monthly US Consumer Price Index (CPI) report for June continued to reflect this major jump in inflation. The headline rate rose from 2.4% to 2.7%. This increase fulfills our expectations. At the same time, the core CPI, which excludes those volatile food and energy prices, ticked up from 2.8% in May to 2.9%. Analysts pointed out that increases in prices are mainly being led by core services. This suggests a peculiar dynamic at play in today’s economy, one that persists even as the share of imported goods has risen.
Energy prices took quite a tumble in June, adding to the mixed inflationary landscape. The increase in core goods prices was almost nonexistent, coming in almost flat with only 0.15% on the month in the positive. This data reflects the resilience of the US economy, which continues to display strength amid various challenges, including geopolitical tensions and supply chain disruptions.
Economic Indicators Show Strength
The US labor market is still growing. The recent jobs report showed employment numbers are still climbing at a steady clip, giving consumers a solid base for spending. Moreover, with credit card delinquencies falling on an annual basis, this indicates a greater level of consumer confidence and overall financial security within households.
All of this is good news, even in the face of continued worries over inflation and possible recession. The Federal Reserve remains vigilant as it monitors these developments, balancing the need for growth with inflationary pressures that could arise from external factors such as tariffs.
Tariffs and Customs Revenues
June was remarkable in US customs history, crossing above $100 billion customs revenues for the first time. This has been largely driven by the tariffs that President Trump imposed on most of the country’s largest trading partners. Even more than tariffs on metal and car imports contributed to this trade surplus. Despite all the worry, these tariffs haven’t resulted in meaningful inflation so far. In turn, it helps consumers maintain their purchasing power while addressing the needs of a new global, decentralized economic frontier.
The lack of inflationary pressure produced by these tariffs begs the question of their long-term effectiveness. Yet they have brought in billions of dollars in revenue to the federal government. Analysts can’t stop looking at whether or not they’ll lead to long-term price hikes. The government’s budget surplus for the month of June underscores a favorable fiscal position, offering further room for economic maneuvering.
Strong Bank Earnings Highlight Robustness
Looking to the financial sector, major banks such as JPMorgan Chase and Citigroup announced earnings on Thursday and Friday, respectively, that beat analysts’ expectations by wide margins. JPMorgan Chase just announced second quarter revenues of $45.68 billion, far exceeding estimates of $43.9 billion. In January, the bank surprised the market with news of a second consecutive dividend increase. It announced a $7 billion share repurchase, a powerful signal of confidence in its fiscal condition.
In its own report, Citigroup surprised on the upside as well, thanks to a boost from record trading volumes seen during Q2. These results are a testimony not only to the resilience of the banks themselves but more importantly, the economic stability that they rest on. Capital markets and financial institutions are cementing their reputation as innovators able to not only withstand disruption but to prosper in doing so. This success strengthens US-wide confidence in the economy.