US Inflation Rate Remains High at 3.7% Despite Decline in Gas Prices

The inflation rate remains high in the US, with prices rising 3.7% in July compared to last year. This is despite a decline in gas prices, but the cost of services such as healthcare and utilities has increased. The Commerce Department's personal consumption expenditures price index (PCE) is running hotter than the consumer price index (CPI), partly because it puts less weight on rental costs.

The PCE index has been pushed higher by the way it calculates financial advice and software prices, which can be volatile. However, the Commerce Department plans to adjust these measurements starting next month, which could lower measured inflation by 0.2 percentage point or so.

Despite cooling from its post-pandemic highs, consumer sentiment surveys show that most Americans are still gloomy about the economy and their finances. This is likely due to inflation eroding incomes, with inflation-adjusted incomes rising just 0.2% compared to last year.