MW Businesses face rising inflation due to tariffs. Will consumers get hit next?

By Jeffry Bartash

S&P surveys show an economy that's weaker but still growing

The numbers: The cost of doing business for U.S. companies rose in June at the second-fastest pace in two and a half years, a pair of S&P surveys showed, reflecting ongoing inflation pressures tied to Trump administration tariffs.

The big question is whether rising business costs get passed along to consumers at Amazon $(AMZN)$, Best Buy $(BBY)$, Home Depot $(HD)$ and other retailers. So far there's been little evidence of that in key U.S. inflation barometers.

Companies in the huge U.S. services sector, for instance, could not raise prices to fully offset their own higher costs because of "more intense competition," S&P found.

The S&P Global "flash" U.S. services sector index slipped to a two-month low of 53.1 in June from 53.7 in the prior month. The service side of the economy employs most Americans.

The S&P Global U.S. manufacturing sector index, meanwhile, was unchanged at 52.0. Some manufacturers such as steel producers are seeing benefits from tariffs, and other companies got a temporary boost in new orders as customers tried to front-run future price increases.

Any number above 50 signals the U.S. economy is expanding, but the details of the S&P report were less encouraging. What they showed is an economy that, while still growing, has lost momentum since the end of last year.

The S&P surveys are among the first indicators each month to assess the health of the economy.

Key details: New orders rose and manufacturers posted the biggest increase in production since February, the last month before widespread tariffs began to kick in.

Virtually every company reported rising costs. "Price pressures rose sharply across both manufacturing and service sectors during June," S&P said.

Employment held steady and in some cases even rose, in a positive sign for the economy.

Big picture: U.S. tariffs are higher now than anytime since World War II, even after the White House sharply reduced them from initial levels.

The path of the economy is likely to depend on whether the U.S. strikes new trade deals that ease the burden on businesses. The biggest threat to the economy could be another burst of inflation, at least temporarily, if high tariffs remain in place.

Looking ahead: "The U.S. economy continued to grow at the end of the second quarter, but that the outlook remains uncertain while inflationary pressures have risen sharply in the past two months," said Chris Williamson, chief business economist at S&P Global.

Market reaction: The Dow Jones Industrial Average DJIA and S&P 500 SPX rose in Monday trading as investors shrugged off the U.S. bombing of nuclear facilities in Iran over the weekend.

-Jeffry Bartash

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June 23, 2025 10:35 ET (14:35 GMT)

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