Truflation Public Peek: U.S. Monthly Inflation – September 2025
Published 23 Oct, 2025
The following is a public peek at our exclusive 11-page in-depth monthly Truflation CPI update presented to our premium subscribers on Oct 13th, 2025, available by subscription, here.
Executive Summary
The U.S. economy expanded at a faster pace than expected pace in Q2 2025, with GDP revised upward to 3.8% from the prior estimate of 3.3%. This marks the strongest quarterly growth in nearly two years. This surprise upside was primarily driven by a sharp contraction in imports, which narrowed the trade deficit and delivered a +4.83 percentage point boost from net exports, reversing the -4.68 point drag in Q1. The contraction in imports is largely attributed to inventory front loading in Q1 by businesses seeking to avoid the rising tariffs.
Despite the trade being the headline driver, underlying domestic strength remains intact with consumer and business spending remaining strong, while labor market resilience continues to support domestic demand although signs for weakening are present.
Exhibit 1 – Gross Domestic Product Percentage Change – Contribution to GDP
Retail sales rose 0.6% month on month and 5.0% year on year, reflecting solid consumer demand. Business investment continues to accelerate, with equipment investment up 8.5% in August following a 0.8% gain in July. The strong fundamentals continue to support the positive GDP outlook with Atlanta Federal Reserve GDPNow predicting a 3.8% GDP growth in Q3.
The labor market remains resilient but is cooling. The initial jobless claims declined by 14,000 to 218,0000 in the week ending the 20th of September. Job growth has slowed in three months to August but layoffs remain muted and corporate margins remain solid, with little signs of compression; indicating no immediate pressure for widespread cuts. The current conditions does not seem to be a drag on the economy and is more a reflection of policy uncertainty than a downturn in demand.
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Inflation Update – Goods-Led Price Pressure Intensifies
Truflation projects a 3.0% year on year rise in the Bureau of Labor Statistics (BLS) Consumer Price Index (CPI) for September, up slightly from 2.9% in August and broadly in line with market expectations (2.9% - 3.1%). The uptick reflects mild but persistent upward pressure on prices, primarily driven by goods inflation and a volatile category of energy.
Goods inflation is leading the charge as tariffs and depleted inventories are pushing goods prices higher, continuing a trend seen throughout Quarter 3. Import prices rose again in August (+0.3% MoM) with early September data suggesting this trend is set to continue. Energy prices, particularly for fuel and natural gas, contributed to headline inflation.
In contrast Core CPI (excluding food and energy) decelerated driven by weakness in the owned housing components, as high mortgage rates continue to weigh on affordability and suppress demand. Services inflation has eased and now trails goods inflation, reflecting the sluggish labor market conditions and slower demand.
Exhibit 4 – Truflation key inflationary metrics: Goods vs Services vs Core Inflation
The services sector as a whole is sluggish. The ISM Services PMI shows stalled growth in September as new orders slowed and employment remained weak. Despite this, input costs in services continue to rise, albeit at a slower rate than goods, underscoring challenges in staffing and wage negotiations.
ISM Manufacturing PMI edged upwards towards recovery to 49.1 (from 48.7) but remained below 50 for the seventh consecutive month, signaling continued contraction. Tariff pressures and weak new orders are still weighing output and hiring.
Exhibit 5 – Truflation Category Inflation Drivers
The most significant upward contributing categories to inflation in September were coming from...
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Sector-Specific Inflation Drivers
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