Mixed Inflation Data
- Mortgage Returns
- Jul 16
- 2 min read
Overview: Over the past week, investors were focused on major inflation data. While the headline figures were a bit lower than expected overall, the details suggested that the impact of higher tariffs may be a concern going forward. As a result, mortgage rates ended the week a little higher.
The Consumer Price Index (CPI) is one of the most highly anticipated measures of inflation released each month. To reduce short-term volatility and get a better sense of the underlying inflation trend, investors generally look at core CPI, which excludes food and energy. In June, core CPI rose just 0.2% from May, below the consensus for an increase of 0.3%. It was 2.9% higher than a year ago, up from an annual rate of increase of 2.8% last month. Although this annual rate has dropped sharply from a peak of 6.6% in September 2022, it is still far above the readings around 2% seen early in 2021, which is the stated target level of the Federal Reserve.
Digging into the details of the report, investors were a bit concerned about the implications for future readings. Shelter (housing) costs continued to be the largest contributor to overall CPI gains, rising 3.8% from a year ago. Components highly affected by tariffs such as apparel and home furnishings also saw big increases in June. By contrast, used vehicles, new vehicles, and airfares posted surprisingly large price declines. Investors are worried that higher tariffs will continue to exert upward pressure on prices going forward.
Another significant inflation indicator released this week, which measures costs for producers, came in well below the expected levels. The June core Producer Price Index (PPI) was flat from May, far below the consensus forecast for an increase of 0.2%. It was 2.6% higher than a year ago, down from an annual rate of 3% in May. This represents the lowest annual rate of increase since April 2024. Of the two major inflation reports, investors tend to place less weight on PPI, since it reflects a smaller portion of the economy than CPI.
Core CPI (annual % change)
Week Ahead
July 17
Retail Sales report
Import and Export Price Indexes
July 18
New Residential Construction report (also known as Housing Starts)
July 23
Existing-Home Sales report
July 24
New-Home Sales report
July 30
Federal Reserve meeting
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