Today, The Line presents a bad news sandwich. That’s when you place bad economic news in between two pieces of good news.
Consumer Prices Rose Just 0.1% in July
A 2.9% decline in gas prices helped keep inflation low in July, as the consumer price index ticked up just 0.1% last month and was 3.4% higher than a year ago. Both these figures were in line with expectations. Core inflation, which excludes food and energy prices, rose 0.2% in July and is up 2.5% over the past year. This data also came in as expected.
After a bad jobs report, this good news on inflation makes it very unlikely that the Fed hikes rates next month unless the PCE price data comes in high. While the war in Iran has made inflation data more volatile, you’d have to go back to the start of the pandemic to find two consecutive months of CPI data this good—remember that consumer prices fell by 0.4% in June.
Retail Sales Fell by the Most in Over a Year
Retail sales declined by 0.6% in July, coming in much weaker than the 0.1%
gain economists were looking for. The last time sales fell that much was in May
of 2025.
One thing to remember is that this data is not adjusted for inflation, so the moderation in prices last month may have kept spending lower. For example, the 2.9% drop in gas prices certainly helped push sales at gas stations down by 0.9%. One thing consumers kept buying in July was clothes, with sales at clothing stores up 1.9% from June.
Consumer spending is about 70% of gross domestic product, so any decline in sales is worrisome, especially after GDP came in weak in the second quarter.
Mortgage Rates Fell for the First Time in Six Weeks
I’m always happy to end a column with good news on housing. The average 30-year conforming mortgage rate fell to 6.67% this week, down from 6.69% the previous week. I know that’s not a big decline, but I’ll take whatever I can get at this point.
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