US inflation still higher than before Iran war began in Feb

The economy, inflation and how those forces could impact the lives of Americans were front and centre over the past week. Trips to the grocery store and gas station are more painful than they were last year, and rising costs are impacting the decisions of both households and businesses.

Here’s a snapshot of prominent economic data and news that occurred over the past week and what it potentially means for you.

US inflation slowed last month and a measure of underlying price pressures also cooled, suggesting higher oil and gas prices from the Iran war are only having a limited impact on broader costs in the economy.

Consumer prices rose 3.4% in July from a year ago, down slightly from 3.5% in June, the labour Department said on Wednesday. But inflation is still higher than before the Iran war began in February, when it was 2.4%. On a monthly basis, prices rose just 0.1% from June to July.

Wednesday’s report comes as the Federal Reserve is sharply divided over whether it should hike its key interest rate to combat inflation. The Fed kept its rate unchanged, at about 3.6%, at a meeting late last month. But the vote was 9-3, with three dissenters favoring a rate hike.

Americans unexpectedly cut their spending in July as a boost from government tax refunds faded.

Retail sales slipped 0.6% last month, the biggest drop since May 2025, from a revised gain of 0.2% in June, according to Commerce Department data released Friday.

There was a notable bump in spending in both April and May as Americans dipped into their tax refunds. That affect may have faded last month.

Excluding sales at gas stations and at auto dealers, retail sales in July fell 0.2%. Gas prices bounced back in recent weeks in what appears to be a stalemate in the Strait of Hormuz.

Sales of previously occupied US homes slowed again in July as record prices and the highest mortgage rates in a year prove to be an insurmountable hurdle for many prospective buyers.

Existing home sales fell 1.7% last month from June to a seasonally adjusted annual rate of 4.06 million units, the National Association of Realtors said Tuesday. That’s slightly above the 4.05 million pace economists were expecting, according to FactSet, and up 0.7% compared with last year.

Home prices continued to rise, hitting unprecedented levels for the month of July, NAR said. The US median sales price increased 2% from a year earlier, to $434,100.

Wholesale inflation dropped last month as gas prices reversed some of their Iran war spike and other costs also cooled, a sign that consumer inflation could grind lower in the months ahead.

The labour Department’s producer price index - which captures inflation before it reaches consumers - rose 4.7% in July from a year ago, down from a much larger 5.5% increase in June. On a monthly basis, wholesale prices were unchanged from June to July, after they ticked down 0.1% the previous month.

The figures follows the government’s consumer price inflation report, released Wednesday, which also showed a modest cooling last month. Still, consumer prices have risen faster than wages for the past four months, underscoring the challenges many Americans have affording necessities such as rent and utilities. If prices continue to outpace wages, many consumers may be forced to dial back their spending in the coming months.

US applications for unemployment benefits rose last week, but layoffs remain at historically healthy levels.

The labour Department reported Thursday that 209,000 people filed jobless claims last week, up from a revised 200,000 the week before and higher than the 205,000 forecasters had expected. The four-week average of applications, which smooths out week-to-week-volatitlity, was unchanged at 199,000.

The overall number of people collecting employment benefits the week that ended Aug. 1 dropped by 22,000 to 1.78 million.

Claims for jobless benefits are a proxy for layoffs, and they’ve been at a historically low range of around 200,000 to 230,000 a week for the past year, suggesting that Americans who have jobs enjoy unusual job security. The US unemployment rate is low at 4.1%, as the economy has proved resilient despite a spike in energy prices caused by the fighting with Iran.

The average long-term US mortgage rate fell slightly for the first time in six weeks on Thursday, marking a glimpse of relief for prospective homebuyers - although borrowing costs remain steeper than they were a year ago.

Agencies