An inflation measure closely watched by the Federal Reserve stayed elevated last month in the latest sign that many Americans are still struggling with higher costs.

Inflation remained high in July even as gas prices fell, partly because the cost of services, including health care, utilities, and financial services, jumped. Yet the government plans to change the way it calculates the cost of some services starting with next month’s figures, which could lower measured inflation.

The Commerce Department’s Wednesday report showed that prices rose 3.7% in July compared with a year earlier, the same as June. Inflation has worsened since the U.S. and Israel attacked Iran in late February, when it stood at 2.9%. It’s noticeably above the Fed’s target of 2%.

Wednesday’s figures are from the personal consumption expenditures price index, a separate gauge from the more widely followed consumer price index, which was reported earlier this month. The PCE index is running hotter than the CPI, partly because it puts much less weight on rental costs, which have been cooling steadily in recent months.

Excluding the volatile food and energy categories, core inflation was also unchanged at 3.3% in July. It had fallen to 2.6% before President Donald Trump imposed sweeping tariffs in April 2025.

On a monthly basis, overall prices rose 0.2% from June to July, after declining 0.1% the previous month and jumping 0.5% in May. Core prices also moved up 0.2% from June to July, up from 0.1% in the previous month. Some Fed officials have said that core inflation running at about 0.2% a month would be a reassuring sign that inflation is heading back to the 2% target.

Many economists have noted that the PCE index has been pushed higher by the way it calculates the cost of financial advice, as well as how it measures prices for software and computer accessories.

— Associated Press

Economy

U.S. GDP up 1.5% in latest estimate

The U.S. economy grew at a sluggish 1.5% pace from April through June. But consumer spending stayed strong.

Growth in gross domestic product — the nation’s output of a goods and services — decelerated from a 2.1% pace from January through March, the Commerce Department reported Wednesday. The second-quarter growth number was unchanged from the department’s first estimate.

Still, consumer spending — which accounts for about 70% of U.S. economic activity — increased at a healthy 3.4% annual clip, up from 0.5% in the January-March period.

The reason for the lackluster growth was imports. They are subtracted from growth because GDP is only supposed to count domestic production. Imports rose at a 12.5% annual pace from April through June, partly due to a surge in shipments of computer chips and other products that support artificial intelligence investment, and sliced 1.64 percentage points off second-quarter growth.

Food

General Mills to cut artificial cereal dyes

General Mills said Wednesday it has removed artificial colors from all its U.S. cereals, including Lucky Charms and Trix.

The Golden Valley-based company has shifted to fruit- and vegetable-based dyes as well as colors derived from spices like turmeric and paprika to give its cereals their customary bright colors.

General Mills said 90% of its U.S. retail products are now free of artificial dyes. Products that still contain artificial colors, like some Betty Crocker cake mixes and Fruit Roll-Ups, will transition to natural dyes by the end of 2027, the company said.

General Mills is the second big cereal maker to announce a transition to natural dyes. WK Kellogg, which makes Froot Loops and Apple Jacks, said earlier this month that it will remove artificial colors from all its U.S. cereals by the end of this year.

— From news services