The consumer price index fell by 0.4% in June and was flat excluding food and energy prices, both below expectations.
The decline lowered the year-over-year increase to 3.5% from 4.2% in May, while the core measure was up 2.6% year-over-year after a 2.9% rate in the previous month.
Food prices rose by 0.2%, while energy prices plunged by 5.7%. Gasoline prices alone were down 9.7%.
Owners' equivalent rents rose by 0.2% and regular rents were up 0.1%, accounting for about one-third of the overall index.
Prices of new vehicles were flat after a 0.3% drop in the previous month and used vehicle prices fell by 0.2% after a 0.1% gain.
The National Federation of Independent Business' monthly sentiment index rose to 97.4 in June from 95.3 in May, with gains in seven of the 10 components, particularly the economic outlook.
"Current economic conditions present small business owners with both encouraging developments and ongoing challenges," said NFIB Chief Economist Bill Dunkelberg. "Lower fuel costs provide welcome relief for businesses as well as consumers, with firms anticipating improved operating conditions over the next six months."
However, elevated interest rates and "modest economic growth" has made owners more cautious in their hiring and spending decisions, Dunkelberg added.
Redbook reported that US same-store retail sales were up 8.2% year-over-year in the week ended July 11, slower than an 11.5% gain in the prior week due as sales were mostly driven by discounts and promotions.