Monthly Update: Inflation

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U.S. inflation picked up last month in an early sign that tariff costs may be starting to funnel down to consumers. Prices, as measured by the Consumer Price Index for All Urban Consumers (CPI-U), rose 2.7 percent nationwide between June ’24 and June ‘25. This represents a rise from the 2.4 percent annual increase recorded in May. Metro Houston’s annual inflation rate increased from its previous reading of 1.2 percent in April to 1.8 percent last month.

At 2.7 percent, U.S. inflation is roughly inline with the 2.6 percent expected by economists in a recent FactSet survey. Core inflation, which excludes the volatile food and energy segments, rose at a steeper 2.9 percent that also matched economists’ expectations. The Federal Reserve has signaled growing openness to interest rate cuts in ’25. But it will likely continue taking a wait-and-see approach and hold back on cutting rates if inflation increases further.

Businesses have so far been hesitant to pass on tariff costs to consumers, but some sectors that are especially sensitive to tariffs – like furniture and recreational goods (including toys, sporting goods, TVs, etc.) – have begun increasing prices at a faster rate. Inflation for new vehicles bucks this trend and remains modest.

In Houston, alcoholic beverages, home furnishings, medical care, food away from home (i.e. restaurants), and food at home (i.e. groceries) saw price increases of three percent or more. Used vehicles, shelter, recreational goods, new vehicles, and educations services saw increases of less than three percent. Gasoline, and apparel saw prices fall.

The next release of CPI data will be on Tuesday, August 12, 2025.

Prepared by Greater Houston Partnership Research.

Colin Baker
Manager of Economic Research
bakerc@houston.org

Clara Richardson
Analyst, Research
crichardson@houston.org

Economy