Most of the decline in services prices is attributable to a 3.9% drop in margins for machinery and vehicle wholesaling, while finished consumer goods excluding food and energy rose at the fastest pace since February.

The BLS adjustment indicates that the labor market slowdown in recent months followed an extended period of moderate job growth, which may lay the groundwork for a series of interest rate cuts beginning next week.

Consumer spending in the second half of the year is off to a better-than-expected start, but a separate report indicates U.S. consumer sentiment unexpectedly fell in early August.

The July PPI indicates companies are adjusting their pricing of goods and services to help offset costs associated with higher U.S. tariffs.

Economic data is finally catching up to the economic reality that U.S. businesses and consumers have been describing for months.

Consumer spending came in much higher than expectations, but because the figures aren’t adjusted for inflation, the increase could indicate either more sales volume or higher prices.

Although tariffs’ impact on consumer prices has been modest thus far, “the day of reckoning is finally upon us, and many [U.S. businesses] are planning price adjustments this summer, likely beginning in July.”

Still, the U.S. core CPI rose by less than expected in June, thanks to falling prices on both new and used cars.