For the fourth consecutive month, prices consumers pay for day-to-day items were little changed. The annual inflation rate was 1.7 percent in May, but even that came down in June, the department said.
Core prices, which are closely watched by the U.S. Federal Reserve, were up 0.1 percent from May to June, while the 12-month core price index showed a gain of 2.1 percent.
The Fed's inflation target is 2 percent. Below that, especially close to zero, fears of deflation set in. Inflation higher than 2 percent simply slows spending, especially with a high unemployment rate.
Food and energy costs, meanwhile, are considered volatile and are left out of the equation for what is considered a critical assessment of how much the transitory costs of food and energy are affecting the rest of the economy.
In July, energy costs fell 0.3 percent, helped by a 1.3 percent drop in the price of electricity. Gasoline prices rose 0.3 percent month-to-month, but are down 5.5 percent on a 12-month basis.
Food prices rose 0.1 percent in July following a gain of 0.2 percent in June. On average, food prices have risen 0.12 percent per month since January with the 12-month rise at 2.3 percent.
The price of vehicles fell marginally in July, while clothing prices rose 0.2 percent month-to-month and 3 percent over 12 months.
A 0.5 percent decline in the price of used cars and trucks contrasts with the small increase in the price of new vehicles, but on a 12-month basis new car costs are up 0.8 percent, while used car and truck costs are up 1.1 percent.
2014: NFL Cheerleaders [PHOTOS]