Rising Prices: Which Goods and Services Are Driving Inflation?

U.S. consumer price inflation accelerated in June, with the Consumer Price Index (CPI) showing price increases for a broad range of goods and services.

According to the latest CPI report, headline inflation was up 0.3% month over month in June, faster than May's 0.1% increase but matching economists' forecast for a 0.3% increase.

The June CPI was 2.7% higher year over year, an uptick from the 2.4% rise seen the month prior and in line with economists' projections.

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Core CPI, which excludes volatile food and energy prices and is seen as a better measure of underlying inflation trends, rose 0.2% month over month and 2.9% year over year. Both figures were higher than what was seen in May but in line with economists' forecasts.

"With the bulk of tariffs on hold for a bit longer, the June CPI report remained fairly tame," says Melissa Brown, head of Investment Decision Research at SimCorp.

But she adds that having a positive or negative viewpoint on the print likely depends on what you're planning on buying or selling.

"If you are planning a vacation, lower airfare is positive, but if you are staying home and redecorating, higher furniture prices look discouraging," Brown notes. "Yes, egg prices are lower than they were last month, but other food costs are higher."

CPI is still above the Fed's 2% target

Despite the in-line data, the bottom line from the June CPI report is that prices are still rising faster than consumers and the Fed would like.

Between 2000 and 2020, annual inflation in the U.S. averaged just 2.1%. (Recall that the Federal Reserve's inflation target is 2%.)

Perhaps we didn't appreciate it enough at the time, but the first two decades of the 21st century were a sort of Goldilocks era for inflation: not too fast and not too slow.

Just have a look at some of the subcategories in the latest CPI report to see how much things have changed. Below, we highlight the goods and services that are weighing most heavily on folks' finances.

Rising prices: where inflation is hitting hardest

Grocery prices were on the rise in May, as three categories saw increases.

Notably, the index for nonalcoholic beverages rose 1.4% in June as coffee prices jumped. The fruits and vegetables index was also on the rise as the price of citrus fruits surged 2.3%. The index for other food at home also increased.

However, the indexes for cereals and bakery products and dairy and related products declined. The meats, poultry, fish, and eggs index also fell as a 10.8% drop in egg prices offset a 2.4% increase in beef and veal.

The food away from home category, which includes meals at restaurants and bars, rose 0.4% in June after gaining 0.3% in May.

Another contributor to inflation was electricity, which was up 1.0% on the month. This contributed to an increase in overall energy costs, as did a rising prices for gasoline and natural gas.

Housing costs, or the shelter index, also remained sticky and lifted inflation last month.

"The index for shelter rose 0.2 percent in June and was the primary factor in the all items monthly increase," the Bureau of Labor Statistics said. "The index for owners' equivalent rent rose 0.3 percent in June and the index for rent increased 0.2 percent."

Elsewhere, prices for household furnishings (+1.0%) and apparel (+0.4%) increased in June, while medical costs were also on the rise. Indeed, the medical care index was up 0.5% due to higher prices for hospital services and prescription drugs.

There was some good news for consumers in the June CPI report: Prices for airfare and new and used cars were all lower last month.

Where inflation goes from here is hard to say as forecasters brace for a bigger impact from President Trump's tariffs.

"Businesses can respond to the tariff increases by raising prices or eating the added costs, and we will most likely see a mix of the two. The CPI increases show the amount that is being passed on to consumers so far," says Steve Dean, chief investment officer at Compound Planning.

Dean adds that many businesses built up inventory levels and consumers front-loaded major purchases to soften the impact of tariffs.

But the fact remains that we "don't know what the exact level and timing of tariffs will be," and this, Dean says, creates uncertainty for both companies and consumers.

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