July Inflation Cools, but Consumer Spending Falters Amid Rising Costs

US inflation cooled in July, but consumer spending declined as Americans struggle with rising costs. The Labor Department reported that consumer prices rose 3.4% in July from a year ago, down slightly from 3.5% in June.

The slowdown in inflation suggests that higher oil and gas prices due to the Iran war are having a limited impact on broader costs in the economy. However, inflation is still higher than before the war began in February, when it was 2.4%. On a monthly basis, prices rose just 0.1% from June to July.

Retail sales slipped 0.6% last month, the biggest drop since May 2025, as consumers cut back on spending due to rising costs. This decline is partly attributed to the fading effect of government tax refunds that boosted spending in April and May.