If the public only listened to the rhetoric of politicians and the headlines and sound bites from the financial and mainstream media, it would be rather easy to be tricked into thinking that inflation was about to explode. After all, the endless uncertainty and jawboning around tariffs has ultimately turned into a fear of an all-out trade war breaking out. It turns out that the impact on prices from these tariffs has so far been negligible. There is always a risk that prices could be jacked up in the coming months and quarters if tariffs drastically affect major industries, but so far the impact of tariffs is just not being felt in the broader economy.

24/7 Wall St. has tracked three solid data points from this week that point to all of these inflation fears having been overblown. This could be more than just good news for those who have been worried that rising interest rates might begin to wreck the economy in their own econo-centric way.

We looked at the producer price index, an outside report by the Federal Reserve and the consumer price index to see the real impact as of the end of August. These should all offer close to real-time inflation data ahead of some regional Federal Reserve reports that will be coming out over the next couple of weeks for more live data covering September. And with so much of inflation ultimately being tied to transportation and energy costs, we already took a look at the region-by-region view of the energy sector.

Again, price pressures not having risen yet does not mean that they cannot increase in the coming months and beyond.

Wednesday’s U.S. Department of Labor Report on the Producer Price Index (PPI) for final demand actually declined by 0.1% in August on a seasonally adjusted basis. Final demand prices were unchanged in July after having increased by 0.3% in June. Year over year, the seasonally adjusted final demand index rose by 2.8%. The Labor Department said that the August decline in the final demand index can be attributed to a 0.1% drop in prices for final demand services. And the index for final demand goods was unchanged.

PPI on a core rate (excluding food, energy, and trade services) was up just 0.1% in August, after rising 0.3% in both July and June. Year over year, gains in the core PPI were up by 2.9% in August. On the product side of the report, the Labor Department said:

In August, over 80 percent of the decrease in prices for final demand services can be traced to margins for machinery and equipment wholesaling, which fell 1.7 percent. The indexes for health, beauty, and optical goods retailing; application software publishing; airline passenger services; and hospital outpatient care also moved lower. Conversely, prices for loan services (partial) jumped 3.0 percent. The indexes for food retailing, bundled wired telecommunication access services, and physician care also rose.

The second data point came from the Federal Reserve’s Beige Book, which is the survey asking business contacts and business leaders in each district about the overall trends affecting each portion of their business. The operational costs for these businesses are on labor costs and operational costs, which all ultimately feed into a large portion of the production costs.

On the labor market side in the Beige Book, the national average consensus was that the job market continued to be tight throughout the country. Half of the Fed’s districts cited instances in which wage growth was mostly characterized as modest or moderate, with a number of regions discussing steep wage hikes for construction workers.

The overall prices component of the Beige Book showed some less than screaming results as well. The Fed reported that prices of final goods and services continued to rise at a modest to moderate pace in most districts, but it did note that there were some signs of a deceleration. All districts noted fairly widespread input price pressure (largely in construction materials and freight transportation) but there was a specific mention that tariffs were reported to be contributing to rising input costs for manufacturers. The Fed’s Beige Book did at least point to some price pressure expectations:

Businesses’ input costs have generally been rising more rapidly than selling prices, though there have been increased efforts to pass along cost hikes to customers. A few Districts noted some increase in inflation expectations.

And for one data point, the find word search browser tool for “tariff” showed a result of 42 times the word appears in the entire Beige Book from September 12 for data as of the end of August. The word tariff appeared just 31 times in the July 18 Beige Book (for data collected on or before July 9), and the May 30 Beige Book (for data collected on or before May 21) included the word tariff just 22 times. For a farther dated reference, the March 7 Beige Book (for data collected on or before February 26) had no instances in the entire report in which the word tariff was used.

Thursday’s follow-up to PPI was the Consumer Price Index (CPI). The Labor Department released its report showing an August seasonally adjusted gain of 0.2%  on headline CPI. That was the same as what had been seen in July, and the all-items index was up 2.7% from August 2017. Increases in the indexes for shelter and energy were cited in the report as the main contributors for the monthly increase in the all items index. Additionally, the energy index rose by 1.9% in August, with a 3.0% price gain in the gasoline index.

Core CPI, sans food and energy, rose by only 0.1% in August as the lowest gain since April. Increases were said to be in the cost of shelter, airline fares and used cars and trucks. The indexes that declined were in apparel, medical care, communication, recreation and personal care.

Economists, investors and business owners pay attention to the annual inflation readings more than the monthly gains when it comes to consumer inflation reports. The Labor Department said that the all-items index was up 2.7% (versus 2.7% in July) and the core was up just 2.2% year over year in August. These were lower than in July, but it’s important to consider that the rise in energy costs was up a sharp 10.2% from August of 2017.

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One can always take the argument that the real jump in prices from tariffs has simply not yet been seen. That said, and considering the readings may change in the months ahead, the real outcome of actual price hikes after hearing about tariffs on hundreds of billions of dollars doesn’t seem to be anywhere as drastic as some of the worrying headlines were sounding around the announcement of those tariffs. The Federal Reserve’s interest rate policy also is still believed to be somewhat data dependent and somewhat based on reasonable expectations.

Stay tuned.

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