The Federal Reserve’s preferred inflation gauge ticked higher last month in a sign that President Donald Trump’s broad-based tariffs are starting to lift prices for many goods.
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Prices rose 2.6% in June compared with a year ago, the Commerce Department said Thursday, up from an annual pace of 2.4% in May. Excluding the volatile food and energy categories, prices rose 2.8% in the past year, the same as the previous month, which was revised higher. The figures are above the Fed’s 2% goal.
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The government’s measure of gas prices jumped 0.9% from May to June, while grocery costs rose 0.3%. Many longer-lasting goods that are heavily imported saw clear price increases, with furniture prices up 1.3% just last month, appliances up 1.9%, and computers up 1.4%.
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The cost of some services fell dramatically last month, offsetting some of the price pressures from goods. Air fares dropped 0.7% from May to June, while the cost of hotel rooms plunged 3.6% just in one month.
Thursday’s report also showed that consumer spending rose 0.3% from May to June, a modest rise that suggests Americans are still spending cautiously. Adjusted for inflation, the increase was just 0.1%, the government said.
Americans’ incomes also picked up just modestly, rising 0.3% last month, a rebound after a 0.4% drop in May. But adjusted for inflation and taxes, incomes were flat in June.
Consumers have been cautious all year. On Wednesday, the government said the economy expanded at a 3% annual rate in the second quarter, a solid showing but one that masked some red flags. Consumer spending, for example, rose at a lackluster 1.4% pace, after an even smaller gain of 0.5% in the first three months of the year. A sharp drop in imports in the April-June quarter, which followed a surge in the first quarter, provided a big lift to the government’s calculation of U.S. gross domestic product.
