July 2025 — Confident Consumers Amid Mixed Signals

July is a bit of a puzzler. The unemployment rate ticked up by 0.1%, inflation stayed flat, yet core inflation increased by 0.2% to 3.1%. Meanwhile, inflation expectations rose slightly, by 0.1%, and the Consumer Confidence Index climbed by 1 point to 61.7%. At first glance, it seems contradictory: core inflation is rising — which usually signals strong demand — but unemployment is also going up slightly, and headline inflation isn’t moving.

Here’s one way to make sense of it: the rise in core inflation may not be coming from classic demand pressures like a tight labor market or booming consumption. Instead, it could reflect lagged effects from earlier months, particularly the tariff-induced cost pressures we’ve been seeing since May and June. These costs are slowly filtering through the economy, pushing up core prices even as consumer demand hasn’t surged further. In other words, it’s less about overheating demand and more about supply-side effects being absorbed gradually.

Consumers, however, seem relatively confident. Confidence rose to 61.7%, and expectations edged up only slightly. This suggests that, while households notice higher prices in certain areas, they are not panicking; they are recalibrating their outlook based on both the data and the broader economic environment. People are starting to separate the “headline noise” from the overall health of the economy, which is why confidence can increase even as core inflation ticks up.

Overall, July looks like a month of mixed signals. The economy isn’t sending a clear single message, but the story seems to be: tariffs continue to push some prices higher, households are aware but not alarmed, and the labor market is still relatively stable. It’s a subtle reminder that economic indicators don’t always move in neat, textbook patterns — and that understanding the “why” behind the numbers is just as important as the numbers themselves.