Shoppers browse shoes at a store in Los Angeles on Aug. 28, 2025.<\/p>\n
Bloomberg | Bloomberg | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n
Inflation picked up<\/a> in August amid higher prices for staples like food and electricity, while tariffs put upward pressure on prices for physical goods like clothing and household furniture, economists said.<\/p>\n The consumer price index<\/a>, a key inflation gauge, rose 2.9% in August from a year earlier, the Bureau of Labor Statistics reported Thursday.<\/p>\n That\u2019s an increase from 2.7% in July<\/a> and the fastest annual pace of inflation since January<\/a>.<\/p>\n \u201cInflation is uncomfortably high and it\u2019s accelerating,\u201d said Mark Zandi, chief economist at Moody\u2019s. \u201cI think we should expect a further acceleration in inflation over the next six to 12 months.\u201d<\/p>\n<\/div>\n The CPI tracks how quickly prices rise or fall for a basket of consumer goods and services, from haircuts to coffee<\/a> and concert tickets.<\/p>\n Inflation is reigniting largely due to re-inflation for consumer goods, said Sarah House, senior economist at Wells Fargo Economics.<\/p>\n Prices for \u201ccore\u201d commodities<\/a> \u2014 which exclude food and energy \u2014 rose 1.5% in August from a year earlier, the fastest annual pace since May 2023.<\/p>\n Excluding the pandemic and its aftermath, core commodities haven\u2019t risen that quickly since 2012.<\/p>\n<\/div>\n Tariff policies pursued by President Donald Trump appear to be the main contributor to rising inflation for goods, she said.<\/p>\n U.S. entities that import goods from overseas pay the import duties. Companies will ultimately pass at least some of those additional taxes on to consumers, though the process will take many months due to various business strategies to try to blunt the impact, economists said.<\/p>\n \u201cThe fact that we\u2019re seeing some of the largest tariffs since the 1940s I think is certainly a part of the pickup in goods prices,\u201d House said.<\/p>\n More from Personal Finance:<\/strong> The tariff impact has been most noticeable in categories like household furnishings, appliances, apparel and recreational goods, economists said.<\/p>\n Apparel prices, for example, have risen by a relatively muted 0.2% over the past year, according to CPI data. However, their annual inflation rate has jumped sharply in recent months, having climbed for three consecutive months from a recent low of -0.9% in May.<\/p>\n A large share of clothing imported to the U.S. apparel comes from Asian nations where tariffs have risen considerably, Zandi said.<\/p>\n \u201cTariffs are all over the apparel prices,\u201d Zandi said. \u201cThey\u2019ve risen quite strongly the last few months.\u201d<\/p>\n<\/div>\n President Trump invoked the International Emergency Economic Powers Act to impose many of his sweeping tariffs on trade partners. The Supreme Court will consider<\/a> the legality of that maneuver during oral arguments in November.<\/p>\n Even if the Trump administration fails in court, there are alternative pathways it can pursue to keep many tariffs in place, economists said.<\/p>\n<\/div>\n Physical goods aren\u2019t the only contributor to rising inflation, however, economists said.<\/p>\n Grocery prices rose by 2.7% in August from a year earlier, up from 2.2% in July and their fastest annual pace since August 2023, according to CPI data<\/a>.<\/p>\n Tariffs may be playing a role for some foods, as with coffee (much of which is sourced from nations like Brazil and Vietnam<\/a>, which have high tariff rates) and those for fruits and vegetables coming from Mexico, for example, Zandi said.<\/p>\n<\/div>\n Beef, for example, has also caused \u201csticker shock\u201d for consumers at the meat counter, due to short supply and steady demand, according to a recent report<\/a> by the Wells Fargo Agri-Food Institute.<\/p>\n \u201cFruits and vegetables, which climbed the most since January 2020, and meats, poultry, fish, and eggs were the food products where prices rose the most,\u201d Gargi Chaudhuri, chief investment and portfolio strategist for the Americas at BlackRock, wrote Thursday. \u201cMany of these food products were affected by tariffs as the U.S. is a net food importer.\u201d<\/p>\n<\/div>\n Meanwhile, disinflation among services has stalled, meaning services likely won\u2019t offer much of a counterbalance against rising goods inflation, House said.<\/p>\n \u201cIt\u2019s no longer slowing, is the near-term issue,\u201d House said. \u201cWe\u2019re going to be stuck here for a few months at least, we think.\u201d<\/p>\n Electricity prices, for example, are up more than 6% since August 2024, according to CPI data.<\/p>\n That\u2019s due largely to strong demand created by the \u201cexplosive growth\u201d of data centers, which use ample electricity, Zandi said.<\/p>\n<\/div>\n Travel prices have also picked up. Airline fares increased almost 6% from July to August (up from 4% the prior month), while lodging like hotels and motels rose almost 3%, according to CPI data.<\/p>\n The pickup is likely due to consumer demand, House said. Consumers concerned about the economy and federal job cuts in the first half of the year pulled back on travel purchases out of caution, she said.<\/p>\n However, there are some downward inflationary pressures, too, economists said.<\/p>\n<\/div>\n The labor market has cooled significantly, which puts downward pressure on wage growth as workers lose their bargaining power, for example, economists said. Businesses may therefore feel less need to increase prices for consumers if their labor costs aren\u2019t rising quickly.<\/p>\n The Federal Reserve is expected to cut interest rates at its upcoming policy meeting next week to help prop up the faltering job market, but that risks keeping inflation elevated, economists said.<\/p>\n \u201cThey have no good choices here,\u201d Zandi said. \u201cThe best course is to cut rates to keep the economy from falling apart, but risks inflation being more entrenched.\u201d<\/p>\n<\/div>\n<\/div>\n\nTariffs contribute to rising goods prices, economists say<\/h2>\n
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Treasury released early list for \u2018no tax on tips\u2019 deduction<\/a><\/p>\n\u2018Sticker shock\u2019 for some groceries<\/h2>\n
Services inflation seems \u2018stuck\u2019<\/h2>\n
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