(CNN) — US consumers reined in their spending in July as inflation remained stubbornly high, new Commerce Department data showed Wednesday.
Consumer spending, when adjusted for inflation, was flat from the month prior, a sharp slowdown from a 0.4% gain in June, according to the report.
The Personal Consumption Expenditures price index – the gauge used by the Federal Reserve for its 2% target inflation rate – rose 0.2% from June, keeping the annual rate at 3.7%, the report showed.
Economists were expecting the PCE price index to increase 0.1% from the month before and for the annual rate to slow to 3.6%, according to FactSet estimates.
When stripping out volatile energy and food prices, the “core” PCE index rose 0.2% on a monthly basis and was up 3.3% from a year ago.
The PCE price index is part of the Commerce Department’s monthly Personal Income and Outlays report, which includes comprehensive data on how Americans earn, spend and save.
The July spending pullback among US consumers coincided with a padding of their household coffers: The saving rate, which fell to a four-year low of 2.6% in June, perked up in July to 3%.
Solid income gains helped buffer those savings last month. After-tax income grew by 0.4%, the strongest gain since January (a month where incomes are typically boosted by Social Security increases and start-of-year wage adjustments).
This story is developing and will be updated.
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