Allegedly tame July inflation seems likely to rise again in August. And consumers already hate it.

INFLATION WATCH was back in the news this week. With Federal Reserve governors signaling that rate hikes will be considered at their meeting next month, the information about price trends in July was looked at as a key piece of data.

And from that side, the news was good if you didn’t want rates to go up, starting with a favorable report on consumer prices in July.

The consumer price index, part of the Federal Reserve’s inflation dashboard, showed a seasonally adjusted increase of 0.1% during July, according to the Bureau of Labor Statistics. Excluding food and energy, the so-called core CPI rose 0.2%...

Though the levels held well above the Fed’s 2% target, the tame monthly readings, coupled with similarly moderate levels in June, indicate that the energy-fueled burst earlier in the year is easing, though prices remain volatile and subject to constantly changing conditions in the Middle East.

Stock market futures rose following the release while Treasury yields were negative across the board. Traders further cut the probability for a September rate hike, lowering the odds to 42%, according to the CME Group’s FedWatch gauge of futures prices.

That leveled off the year-over-year increase in Consumer Prices that had exceeded 4% a couple of reports ago.

The next day, the Producer Price Index report said cost pressures lessened for businesses as well.

Wholesale costs for goods and services were flat in July, the Bureau of Labor Statistics reported Thursday in the latest positive sign for inflation.

The producer price index, a measure of underlying inflation pressures, was unchanged for the month, below the 0.2% Dow Jones consensus estimate and after falling 0.1% in June. The June figure was revised from a previously reported decline of 0.3%.

Excluding food and energy, the core PPI rose 0.2%, against the forecast for a 0.3% gain. The core PPI excluding trade services increased 0.4%.

But a couple of items made me skeptical that the inflation of the first half of 2026 was slowing down to that 2% level. The first is the Institute for Supply Management (ISM), whose monthly reports from businesses have shown prices continue to rise at a significant clip. And while it may not be as rapid as we were seeing, it’s still well above the rate that those businesses were reporting in 2024 or 2025.

So what’s correct? Is it the information in the BLS reports, or is it from the businesses who are supplying info to the ISM? After all, if there’s one area where the Trump Administration would manipulate data, it would be in the inflation reports because Trump is constantly saying how he wants interest rates to stay where they are or go lower.

Whether it’s honest or not, I note that the CPI and PPI reports say gasoline prices went down in July for the second straight month (CPI gas -2.9%, PPI gas -5.7%). That’s despite AAA saying that the nation’s average gas price rose from $3.80 on 4th of July weekend to $4.10 by the end of the month.

I looked at the explanations of how these price indexes are figured in the CPI report, and I don’t get a complete answer as to when these prices are measured.

The CPIs are based on prices of food, clothing, shelter, fuels, transportation, doctors’ and dentists’ services, drugs, and other goods and services that people buy for day-to-day living. Prices are collected each month in 75 urban areas across the country from about 6,000 housing units and approximately 22,000 retail establishments (department stores, supermarkets, hospitals, and other types of stores and service establishments). All taxes directly associated with the purchase and use of items are included in the index. Prices of fuels and a few other items are obtained every month in all 75 locations. Prices of most other commodities and services are collected every month in the three largest geographic areas and every other month in other areas. Prices of most goods and services are obtained by personal visit, telephone call, web, or app collection by the Bureau’s trained representatives.

So does BLS just take a moving average throughout the month, so the low prices in the first half of July overweight the “average” price? And would that mean the higher gas prices of August end up showing as an even higher price hike in the inflation report, because July’s average price was lower than it was at the end of the month?

It definitely feels like inflation has bounced back in August, and it’s reflected in a drop in the University of Michigan’s consumer sentiment report, which came out on Friday.

Consumer sentiment fell about 8% this August, ending two consecutive months of improvement. While views of personal finances saw only minor declines, expected business conditions sank 11% for the short run and 17% for the long run. Decreases in sentiment were seen across the political spectrum, with Republicans exhibiting the strongest month-to-month decline in August. Sentiment among Republicans is now 19% below readings just prior to the Iran conflict and the lowest since the 2024 election. Although the early-month weakening in sentiment was pervasive across various demographic groups, notably large reductions were seen among older consumers, lower-income consumers, and those without a college degree. These groups are all particularly vulnerable to any erosion of purchasing power stemming from inflation. Across all consumers, only 8% expect their income growth to exceed inflation in the year ahead, down from 18% in December 2024, a reflection of the belief that high prices will continue to be burdensome.

Trump/GOP has ZERO plan or really much interest to do anything about this rebounding inflation and the related weakening in consumer sentiment. Good luck running on being the folks in charge of this situation in 80 days.