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The U.S. Bureau of Labor Statistics reported that consumer prices rose 3.4 percent in the year through July, easing from 3.5 percent in June with a monthly increase of just 0.1 percent. The agency’s earlier readings showed inflation had climbed as high as 4.2 percent by May after the conflict with Iran erupted in February and drove energy costs sharply higher. The Federal Reserve held its key interest rate at 3.6 percent last month after a divided 9-3 vote in which three members favored a hike to address persistent price pressures.
Commerce Department data showed Americans unexpectedly cut spending in July with retail sales slipping 0.6 percent, the largest drop since May 2025, as the earlier boost from government tax refunds faded. Excluding gas stations and auto dealers, sales fell 0.2 percent while gasoline prices began rebounding amid the continued stalemate in the Strait of Hormuz tied to the conflict. The spending pullback comes as consumer prices have outpaced wage growth for four straight months, adding strain for households on rent, utilities and other necessities.
Existing home sales fell 1.7 percent in July to a seasonally adjusted annual rate of 4.06 million units, the National Association of Realtors reported, as record prices and elevated mortgage rates deterred buyers. The median sales price climbed 2 percent from a year earlier to an unprecedented $434,100 for the month of July. High borrowing costs that remain above year-ago levels have compounded the challenge for prospective purchasers in the housing market.
Labor Department figures placed the producer price index at a 4.7 percent annual rise in July, down from 5.5 percent in June, with wholesale prices flat on the month after a prior decline. The cooling at the wholesale level followed the consumer price report and points to possible further moderation in retail inflation ahead. Yet the gap between price increases and wage gains has left many households with reduced purchasing power in recent months.
Initial claims for unemployment benefits rose to 209,000 for the week, the Labor Department said, up from a revised 200,000 the prior week though the four-week average held at 199,000. The total number of people collecting benefits dropped by 22,000 to 1.78 million through early August, while the overall unemployment rate stood at 4.1 percent. The labor market has demonstrated resilience despite the energy price spike that accompanied the February outbreak of hostilities with Iran.
Mortgage rate data indicated the average long-term rate eased slightly for the first time in six weeks, providing a modest signal of relief for homebuyers even as borrowing costs stayed higher than a year ago. The latest readings across inflation, spending and employment arrive as the economic effects of the Iran conflict continue to shape policy discussions at the Federal Reserve. Separate Labor Department releases confirmed that the underlying trends reflect limited pass-through from higher oil and gas prices into the broader economy so far.
