U.S. inflation eases as spending and housing cool

Consumer prices in the United States continued to rise in July but at a slightly slower pace. The Consumer Price Index increased 3.4% from a year earlier and 0.1% from June, indicating modest cooling compared with the previous month’s annual rate. A measure of underlying price pressures also eased, suggesting broader cost increases are losing some momentum even as overall price levels remain elevated.

On the wholesale side, inflation also showed signs of slowing. The Producer Price Index rose 4.7% year over year in July, down from a 5.5% increase in June. Month to month, wholesale prices were unchanged after a small decline the previous month, pointing to reduced upward pressure in the production pipeline.

Retail sales data signaled a notable softening in consumer spending. Overall retail sales fell 0.6% in July from June, marking the largest monthly decline since May 2025. The prior month’s sales were revised to a 0.2% gain, underscoring the contrast between June’s growth and July’s pullback.

Spending weakness extended beyond volatile categories. Excluding gas stations and auto dealers, retail sales declined 0.2% in July. The figures indicate households became more cautious at the start of the third quarter even as inflation pressures moderated.

The housing sector showed further signs of strain in July. Sales of previously occupied homes fell 1.7% from June to a seasonally adjusted annual rate of 4.06 million units. At the same time, the U.S. median sales price rose 2% from a year earlier to $434,100, indicating that affordability pressures remain despite slower sales.

Mortgage rates offered only limited relief to potential buyers. The average rate on 15‑year fixed‑rate mortgages edged down to 5.96% from 6.01% the prior week but stayed above the 5.71% average a year earlier. Elevated borrowing costs, combined with higher prices, continue to weigh on housing demand.

Monetary policymakers maintained a cautious approach in light of the mixed data. At its most recent meeting, the Federal Reserve left its key interest rate unchanged at about 3.6%. The decision was not unanimous: the policy vote was 9‑3, with three officials favoring an increase, reflecting differing views on the balance between inflation risks and economic momentum.

Financial markets remained resilient despite signs of slower growth. U.S. stock indexes traded near record highs even after the weaker retail‑sales figures. Treasury yields were mixed following the report, suggesting investors were weighing softer demand against easing inflation and an unchanged policy rate.