More mixed signals from economic data and on-again, off-again tariffs continue to keep many investors on the sidelines, awaiting some signs of stability. The latest inflation report showed July prices rising 2.7% YoY, with most of the increases coming not from tariff-impacted goods but from services. Dental and medical services were up significantly, as were flight prices. Considering the tariffs currently in place – including a 10% universal tariff and the 15% on goods from the EU, Japan, Vietnam, and South Korea – why haven’t they affected inflation yet? Because most importers, including auto and other manufacturers, are still selling products they stockpiled and have not yet passed increased costs on to consumers. (Indeed, the heaviest tariffs were only recently enacted.)
Based on the moderate increase in CPI, Treasury Secretary Scott Bessent is recommending – and traders are betting – that the Fed will cut interest rates by a half-point in September.
Meanwhile, the latest ISM Purchasing Managers Index showed manufacturing contracting for a fifth month in a row, registering 48 percent, 1 percentage point lower than the previous month. New orders have been up and down this year, rising in May but falling in June (the latest tracked month). This includes a drop of 9.4% in durable goods orders, which follows several months of growth (probably due to stockpiling to forestall inflation creep from the new tariffs).
Don’t forget to check out our new quarterly business cycle index here.
(Updated 8/13/25)
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