U.S. Economic Item: CPI Report
The most recent CPI report came in as expected. The 3.4% Y/Y increase is well above the Fed’s 2% target. The Fed looks at the CPI but will wait until later this month for the Personal Consumption Expenditures (PCE) report before setting policy.
Energy prices tied to disruptions in the Middle East and tight labor supply in the services sector (primarily health care and auto repair) are the primary culprits. The bottom line is that input costs will be higher (transportation and fuel surcharge prices alone are much higher Y/Y – any product will face some inflationary pressure as it moves through the supply chain).
Diesel Fuel Surcharges to Continue into 2027
Based on EIA (U.S. Energy Information Administration) forecasts for diesel prices, fuel prices are likely to remain elevated into 2027. According to the EIA, diesel prices will remain above $5.00 per gallon (averaging $3.66 in 2025 pre-conflict) through Q3 and will soften slightly to $4.86 per gallon through Q4. However, it will take until 2028 for prices to return to pre-conflict rates, based on the current EIA forecast (partly due to refinery closures in California, which are straining U.S. supply).
I mention it because many of you will be budgeting for the next quarter, and you should keep that in mind. Also note that the EIA expects “severe constraints” through August, but it doesn’t expect conditions and throughput to return to pre-conflict averages until early 2027.
Read more about how this, financial developments, and other global issues could affect your supply chain.
