The fall in sky-high energy prices gets much of the credit for the lower inflation readings. The BLS said July's 1.8% drop in wholesale goods prices -- the largest monthly decline since a lockdown-triggered plunge in April 2020 -- is a function of lower energy prices. The agency also attributed 80% of the price decline in goods to a 16.7% drop in gasoline prices from June to July.

Prices at the pump hit a symbolic threshold on Thursday, falling below $4 a gallon for the first time since March. Nationwide, the average price for a gallon of gas was $3.99, according to AAA, which attributed at least some of the drop to cooling demand.  

"What it reflects is that gasoline demand is maybe a little bit more elastic than people think," said Stewart Glickman, energy equity analyst at CFRA Research, noting that Americans have been driving less in response to the rapid jump in prices at the pump in the spring and early summer.