Zacks Investment Management

In today’s Steady Investor, we look at the latest economic signals and what they could mean for markets and investors, including:

• Inflation eases, Fed stays cautious
• Tariff refunds boost corporate earnings
• Credit delinquencies send mixed signals

Inflation Eased in July But Remains Well Above the Fed’s Target – July’s inflation data offered some relief, but probably not enough to nudge the Federal Reserve back into rate cutting mode. According to the U.S. Bureau of Labor Statistics, consumer prices rose 3.4% from a year earlier, down slightly from 3.5% in June. Core inflation, which excludes food and energy, eased to 2.5% from 2.6%, its lowest annual reading since 2021. On a monthly basis, headline CPI rose 0.2%, while core prices also increased 0.2%.¹

Headline (Blue Line) and Core (Green Line) Consumer Price Index Over the Past 10 Years

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Many market participants tend to focus on CPI when measuring inflation, but we also think it’s smart to monitor producer prices, which tend to feed down to consumer prices. On that front, the producer-price index was unchanged in July, better than economists’ expectations for a 0.2% increase, after falling 0.1% in June. Wholesale energy prices edged lower, helping keep input-cost pressure contained.The next inflation report to watch for will be the Fed’s preferred PCE report, due later this month, which may provide confirmation on whether inflation is truly easing.Regardless of whatever move we may see, inflation remains above the 2% target, and several officials have argued rates may still be too low. That makes the odds of a rate cut at the September meeting quite low, in our view.

How Tariff Refunds are Impacting U.S. Corporate Earnings – Tariff refunds are starting to flow back to U.S. companies, creating a short-term boost to earnings for some firms (note: the mention of individual companies is not a recommendation to buy or sell any security). So far, more than 40 S&P 500 companies have reported about $9.6 billion in refunds, with at least $2.1 billion already received in cash. Some of the largest reported amounts include roughly $2.2 billion for Apple, $986 million for Nike, $800 million for FedEx, $640 million for Amazon, and $500 million for General Motors. U.S. Customs and Border Protection had received more than 252,000 refund applications as of July 31 and accepted $128.7 billion in refunds for processing.

For some companies, the impact has been meaningful. Apple said tariff refunds added 11 cents to quarterly earnings per share, about 5% of the quarter’s total. GE HealthCare said refunds contributed 18 cents of its $1.24 in quarterly EPS. It’s not all a flow-through to earnings, however. Refunds are being booked differently across companies, and some firms are still waiting for cash. Others are passing refunds back to customers. More importantly, many companies continue to face ongoing tariff costs. Caterpillar, for example, recorded $392 million in expected recoveries but still expects $2.2 billion in tariff payments this year. The takeaway is that refunds can help near-term earnings, but they are not the same as recurring profit growth. It’s important not to conflate the two.⁴

Credit Card Delinquencies are Sending Mixed Signals About Consumers – Credit-card delinquencies have been getting attention recently, as one widely followed measure has risen to its highest level since the aftermath of the 2008 financial crisis. But a closer look suggests the headline may be overstating the degree of new consumer stress.The issue comes down to how long severely delinquent debts remain in the data. The New York Fed’s measure includes credit-card loans that are 90 or more days past due, including balances that lenders have already charged off as unlikely to be collected. Those balances can remain on credit reports long after the loan has left a bank’s books.That reporting pattern appears to have changed. Between 2004 and 2012, about 40% of charged-off debts were still being reported one year later. By 2024, that share had doubled. As a result, the stock of reported delinquent debt has kept rising even though the flow of new delinquencies has stabilized.When researchers exclude severely derogatory balances, credit-card delinquencies have been steadier since 2024. The broader consumer-credit picture also looks more stable: total household debt fell by $13 billion in the second quarter, while delinquency rates across consumer loans were generally steady.⁵

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• How to plan for emergencies that can derail your retirement investments
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• Three ways to generate income during retirement
• Plus, other key steps to help you realize your retirement goals

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Disclosure