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Retail activity was flat in July as falling fuel prices held back gas station sales and consumers turned more heavily to online shopping, the Census Bureau reported Wednesday.

While advance retail sales were unchanged, total receipts excluding autos rose 0.4%. Economists surveyed by Dow Jones had been looking for a 0.1% increase in the top-line number and a flat total ex-autos. June’s gain was revised down to 0.8% from 1%.

Retail and food sales excluding gasoline and autos rose 0.7% from a month ago.

The numbers are adjusted seasonally but not for inflation, and come during a month when the consumer price index also was flat.

A tumble in fuel prices off their record nominal highs pushed down sales at the pump, with gas station receipts off 1.8%. Motor vehicle and parts dealers sales also fell sharply, declining 1.6%.

Gas prices had eclipsed $5 a gallon in many locations earlier in the summer, but fell through July and most recently were at $3.94 a gallon for regular unleaded, according to AAA.

“People appear to have used some of the savings from lower gas prices to spend more on other items, both in nominal and — very likely — real terms,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics. “Auto sales have been severely constrained by the chip shortage, so pent-up demand likely is substantial. July’s other losers were department stores and clothing retailers, but all these components are noisy and subject to revisions.”

Those pullbacks in gas and auto sales were offset by a 2.7% increase in online sales and a 1.5% gain in miscellaneous stores.

Consumers have been fighting to keep up with an inflationary environment that has seen prices overall increase 8.5% from a year ago, close to the highest level in 40 years. Price rises have been especially pernicious in the food and energy category; even with the July slide in energy prices, gas station receipts climbed 39.9% from a year ago.

July provided some respite from inflation pressures, and the decline in fuel costs particularly allowed consumers to spend elsewhere.

Food sales rose just 0.2%, however, even as the food price index as measured by the Bureau of Labor Statistics increased 1.1% for the month. Sales at bars and restaurants also struggled, rising just 0.1%.

Some retailers also have struggled in the current environment.

Target on Wednesday said its earnings tumbled close to 90% from a year ago as it has had to mark down prices on unwanted inventory.

The Federal Reserve has been using interest rate increases to hold back inflation. The central bank enacted consecutive 0.75 percentage point hikes in June and July and is expected to keep moving rates higher until inflation comes down to the Fed’s 2% goal.

Correction: Target on Wednesday said its earnings tumbled close to 90% from a year ago. An earlier version misstated the metric.

July’s consumer price index report finally showed a sign of potential relief – inflation ticked up less than expected from a year ago, and was flat on the month, meaning that a basket of items and services generally stayed the same price.

But some items have fallen, on a monthly and weekly basis, potentially signaling that inflation has passed its peak and may be cooling off.

This is welcome news to consumers who have been squeezed by higher prices and are looking for any sign of relief. Some of the top items whose prices have come down include eggs, milk and gasoline.

“Fuel inflation was really big and that’s going to have a pretty meaningful impact on consumers and their spending patterns,” said John Leer, chief economist at Morning Consult. “I think that’s actually a good thing for the economy.”

Many of the items that have declined are tied to food and energy, often the most volatile costs that consumers deal with.

Grocery store staples have dipped. Large white eggs cost, on average, $2.14 for a dozen, during the week of Aug. 15-21, according to the USDA. That’s a whopping 60 cent drop from the prior week, when the average was $2.74 per dozen.

The average price for a gallon of milk slipped to $3.16 from $3.24 during the period of Aug. 8-12 from the previous month, and the average price of butter fell to $3.67 from $4.68 in the same timeframe, per USDA data.

Chicken breast prices also slipped on a weekly basis during the period of Aug. 8-12, but other parts of the chicken are declining as well – chicken wing prices have been trending down and are now cost less than they did pre-pandemic, according to data from the Department of Agriculture.

Outside of food, declines can be seen in consumer goods and services related to energy.

This is because oil prices are often subject to big price swings as the balance between supply and demand shifts. This year, the war between Russia and Ukraine threw that balance off and the price of oil spiked when countries stopped buying from Russia, a major exporter.

However, oil prices have come back down, lowering the cost of energy and particularly gasoline. The national average for a gallon of regular gasoline is $3.918 as of Friday, according to AAA. While that’s higher than it was a year ago, it’s a solid decline from the $4.495 consumers were paying for gas a month ago, and a sharp drop from the recent high of $5.016 hit in June.

That also potentially affected another area of the economy that saw a price dip month over month – airfares. The average price of a domestic airline ticket has dropped to $295 in August from $332 in July, according to travel site Hopper. That’s also back in-line with the average price for a domestic ticket in the same month in 2019.

Outside of fuel costs, this dip in ticket prices could be because consumer demand is fading, according to according to Kevin Gordon, a senior investment research manager at Schwab.

“That could be demand destruction,” he said, adding that the reopening from pandemic lockdowns inflated the price of things as consumers rushed to take vacations again. Now, as vacation season is winding down, that demand has fallen off.

Of course, one month of prices falling in some categories isn’t a trend.

The slowdown in price increases – and dips of costs of some items and services – may mark the beginning of declines, but more months of data would be needed to know for sure.

“I think it’s way too early to start taking a victory lap,” said Leer, adding that consumers should expect to be living in a world with elevated inflation for the next year and a half to two years.

In addition, it’s important to remember that falling prices, or inflation cooling off, may ultimately signal that the U.S. economy is slowing down.  

“You want the price pressures relieved, but what the end goal with that is probably that we’re getting closer to a recession,” said Gordon. As the Federal Reserve continues to increase its benchmark interest rate, it wants the economy to slow down but will try not to tip the U.S. into a recession which would lead to job losses.

Further, prices of other common items have remained stubbornly high and are still climbing. The price of most fruit, for instance, continues to stay high and even increase week after week, according to USDA data. Swift changes are normal as well — even though dairy fell through Aug. 12, prices of milk and butter ticked back up through Aug. 19, USDA found.

Coffee prices were up 3.5% from June to July, according to the Bureau of Labor Statistics. Housing costs such as rent have also remained high and are some of the hardest to pull back down, Gordon noted.

Still, seeing the prices of common items trend back down is a good thing for consumers and sentiment.

“I think consumers increasingly believe that inflation is going to come down,” said Leer.

LONDON — Facing soaring energy bills, rising costs and rapidly declining consumer purchasing power, small businesses across the U.K. are struggling to make ends meet.

New data on Wednesday showed U.K. inflation jumped to a 40-year high of 10.1% in July as food and energy costs continued to soar, exacerbating the country’s cost-of-living crisis.

The Bank of England expects consumer price inflation to top out at 13.3% in October, with the country’s average energy bills (set via a price cap) expected to rise sharply in the fourth quarter to eventually exceed an annual £4,266 ($5,170) in early 2023.

On Wednesday, a director of U.K. energy regulator Ofgem quit over its decision to add hundreds of pounds to household bills, accusing the watchdog of failing to strike the “right balance between the interests of consumers and the interests of suppliers.”

Real wages in the U.K. fell by an annual 3% in the second quarter of 2022, the sharpest decline on record, as wage increases failed to keep pace with the surging cost of living.

A new survey published Friday also showed consumer confidence falling to its lowest level since records began in 1974.

‘Absolute madness’

“While the energy price caps do not apply to businesses directly, millions of small business owners are still experiencing increased energy bills at a time when costs are rising in most operational areas,” said Alan Thomas, U.K. CEO at insurance firm Simply Business.

“Simultaneously, consumer purchasing power is going down as Brits cut back on non-essential spending, harming the books of SME [small and medium-sized enterprise] owners.”

This assessment was echoed by Christopher Gammon, e-commerce manager at Lincs Aquatics — a Lincolnshire-based store and warehouse providing aquariums, ponds and marine livestock.

The business has seen its energy costs rise by 90% so far since the war in Ukraine began, Gammon told CNBC on Thursday, and its owners are provisioning for further increases in the coming months.

“We are combating the rising cost with switching everything to LED, solar panels, wind turbines (planning in process) and closing down unused systems,” Gammon said.

“We have also had to increase the price of products — most of these have been livestock as they are now costing more to look after.”

Customers are increasingly withdrawing from keeping fish and reptiles due to the cost of maintenance, and on Wednesday the store had a customer bring in a snake they could no longer afford to care for.

The spiraling costs forced Lincs Aquatics to close a store in East Yorkshire, laying off several workers, while trying to offer pay rises to staff at its two remaining locations in Lincolnshire in order to help them through the crisis.

The business is also working to expand its online shop due to rising in-store upkeep costs, as heating water for marine aquariums and purchasing pump equipment become ever more expensive.

In early July, a quarterly survey from the British Chambers of Commerce found that 82% of businesses in the U.K. saw inflation as a growing concern for their business, with growth in sales, investment intentions and longer-term turnover confidence all slowing.

“Businesses face an unprecedented convergence of cost pressures, with the main drivers coming from raw materials, fuel, utilities, taxes, and labor,” said BCC Head of Research David Bharier.

“The continuing supply chain crisis, exacerbated by conflict in Ukraine and lockdowns in China, has further compounded this.”

BCC Director General Shevaun Haviland added that “the red lights on our economic dashboard are starting to flash,” with almost every indicator deteriorating since the March survey.

Phil Speed, an independent distributor for multiservice company Utility Warehouse, based in Skegness, England, liaises with brokers to find energy deals for business clients.

He told CNBC earlier this week that for the first time in 10 years, he had been unable to obtain a better deal for a client than their out-of-contract rate — the typically expensive rates paid when a business or individual does not have a contracted deal in place.

“I think the unit rate she was quoting was 60p [pence] a unit for gas, which is just ridiculous. I’d imagine a year ago, we’d have been looking at 5 or 6p. It’s just absolute madness,” Speed said.

“We’ve got no idea what’s going to be presented to us, because we’ve got no idea what’s going to happen. The price is just going ballistic. No-one’s going to buy it.”

The cost of gas for both businesses and consumers are only expected to increase through the colder winter months. Speed noted that local cafes cooking on gas will likely struggle, as they have no choice but to continue using it, unless they can replace gas appliances with electric ones.

‘Scream very loudly at somebody’

Rail strikes have already brought the country to a halt on multiple days throughout the summer and look set to continue, while postal workers, telecoms engineers and dock workers have all voted to strike as inflation erodes real wages.

Conservative leadership favorite Liz Truss was earlier this month forced into a dramatic U-turn on a plan to cut public sector pay outside London, which would have axed wages for teachers, nurses, police and the armed forces alike.

Local authorities recently offered state school support staff a flat pay rise of £1,925 per year, meaning a 10.5% increase for the lowest-paid staff and just over 4% for the highest earners, after pressure from three of the country’s largest unions.

One woman in her early fifties – a member of support staff at a state school in Lincolnshire who asked not to be named due to the sensitive situation and concerns on public reprisals – told CNBC that years of real-terms pay cuts had left many low-paid public sector workers struggling to make ends meet.

The British government in 2010, in the aftermath of the global financial crisis, announced a two-year pay freeze for public sector workers, followed by a 1% average cap on public sector pay awards which was lifted in 2017, with average pay rises increasing to roughly 2% by 2020.

While the 10.5% rise for the lowest-paid school support staff will ease the pressure, the woman said her energy costs had doubled and her private landlord had attempted to increase her rent by £40 per month, which she had not agreed to and which may mean she would need to sell her car to cover basic living expenses.

She called on the government to temporarily reduce the “standing charge,” a fixed daily amount households have to pay on most gas and electricity bills no matter how much they actually use, and to up its efforts to recoup one-off “windfall taxes” from energy companies such as BP, Shell and Centrica, which are reporting record profits..

“I think this is an even bigger crisis than [the Covid-19 pandemic], because this is going to affect not just lower earners, but maybe even middle earners as well, because I don’t see how anybody can absorb those kinds of energy costs,” she said.

The pressure being exerted on businesses and the government to increase wages in the face of skyrocketing living costs has raised further concerns about inflation becoming entrenched – but this consideration is far removed from the reality of working families increasingly being forced to cut back on essentials.

“It’s alright saying ‘we can’t keep putting people’s pay up, that will make the cost of living worse,’ but the cost of living is out of control already, and the only way for people to survive is if their wages increase,” the woman said.

“I know it’s a catch 22, but I don’t see a way around that really — you’ve got to eat.”

The situation in recent months, even before the anticipated worsening of the energy crisis, has already begun to take a toll.

“I just think I’m a very honest, hardworking person. I’ve never committed a crime, always done things right, but now I’m starting to feel like that gets you nowhere in this country,” she said.

“For the first time in my life, I want to go out and march in protest and scream very loudly at somebody, and you just think ‘what does it take?'”

Initial filings for unemployment benefits declined slightly last week though they were consistent with a drift higher in layoffs that began in the spring, the Labor Department reported Thursday.

Jobless claims totaled 250,000 for the week ended Aug. 13, down 2,000 from the previous week and below the 260,000 Dow Jones estimate.

The four-week moving average for claims, which helps smooth out weekly volatility, also fell by 2,750 to 246,750.

Earlier this year, claims had hit their lowest level in more than 50 years, but began moving higher in April after bottoming at 166,000. The four-week moving average has risen during that time by nearly 80,000.

Continuing claims, which run a week behind the headline number, totaled 1.437 million, an increase of 7,000.

Policymakers are watching the jobs market closely at a time when inflation is running near 40-year highs. Federal Reserve officials have instituted a series of interest rate increases aimed in part at cooling a labor market in which there are nearly two jobs open for every available worker.

At their July meeting, Fed officials noted “tentative signs of a softening outlook for the labor market” that included a rise in weekly claims, according to minutes released Wednesday. Policymakers said they were determined to continue to raise interest rates until inflation under control even if meant more a slowdown in hiring.

“Unfortunately, what’s good for the American worker is bad for the Fed’s attempt to being inflation back down to 2% and this will complicate their job and cause them to raise rates higher and for longer than many people currently expect,” said Chris Zaccarelli, chief investment officer for Independent Investor Alliance.

In other economic news Thursday, the Philadelphia Fed reported that its monthly manufacturing survey for August rose to a reading of 6.2, representing the percentage difference between companies expecting expansion vs. contraction. That was an improvement over July’s minus-12.3.

The level was above the estimate for a minus-5 and helped quell fears that manufacturing might be headed for a major slowdown. A similar survey on Monday from the New York Fed fell a stunning 40 points as respondents indicated that business conditions were deteriorating.

The indexes for prices paid and received both declined on the month, though they remain well into territory that indicates inflation is still present. Hiring also improved as did new orders, though the latter still registered a reading of minus-5.1.