With one day left in the month, American casualties in July are the lowest since the troop surge began in February, reports CBS News national security correspondent David Martin, and civilian casualties are down by a third.
U.S. officials attribute that to the dismantling of networks which make roadside bombs and to American soldiers protecting the local population.
It would only take a few spectacular attacks to reverse those trends, but even critics of the war strategy are encouraged.
"The moment we got to Baghdad, everything felt very different from previous trips to Iraq," says former CIA analyst Ken Pollack.
Earlier this year, Pollack published an article about Iraq titled "Things Fall Apart." Now he sees "a sudden change in American fortunes."
"This is the first time I have gone to Iraq and actually felt that the United States knew what it was doing and was actually creating some degree of progress," Pollack says.
Retired Marine Gen. Jim Jones, who is conducting a congressionally ordered study of the Iraqi security forces, also came back from Iraq saying privately it was better than he expected.
By any measure, Iraq is still a deadly mess; no one is claiming to see light at the end of the tunnel.
"We have not won this war," Pollack says. "And we didn't see something that looked like victory over in Iraq. All we saw was progress."
It's just enough progress so that a critic like Michael O'Hanlon, who used to think the surge was too little too late, now believes it should be continued.
"For me, gut instinct, just piecing all of the information together subjectively, I thought we should give it a few more months into 2008," O'Hanlon says.
That is exactly what the American commander Gen. David Petraeus wants — continue the surge into next spring and then start a gradual withdrawal back to the pre-surge troop level of 130,000 by the end of 2008.
In other developments:
Meanwhile, Iraq's parliament adjourned Monday for an August recess without receiving from the government a series of U.S.-backed draft laws designed to promote national unity and stem support for the Sunni-led insurgency.
Speaker Mahmoud al-Mashhadani closed the three-hour session without a quorum present and declared it would not resume work until Sept. 4.
Legislators blamed the government of Shiite Prime Minister Nouri al-Maliki for failing to construct compromise versions of the key pieces of legislation such as the so-called oil law, intended to ensure a fair distribution of Iraq's considerable oil wealth.
"We were supposed to discuss important issues in the month of July, but we did not. Sitting in August is unconstitutional and even if we sit next month, that's no guarantee that the important business will be done," said Mahmoud Othman, a prominent Kurdish lawmaker.
"There are Iraqi-Iraqi and Iraqi-American differences that have not been resolved. The government throws the ball in our court, but we say that it is in the government's court and that of the politicians. They sent us nothing," he said.
Also Monday, a minibus exploded in a central Baghdad market district, killing at least six people — a brutal reminder of the dangers facing Iraqis who celebrated by the tens of thousands Sunday night after their national team won the prestigious Asian Cup soccer tournament.
Black smoke rose into the air after the blast struck a transit point near Tayaran Square at about 1 p.m., damaging several nearby cars and kiosks selling clothes, fruit and juice, police and hospital officials said. The minibus was one of several waiting for passengers heading to predominantly Shiite areas in eastern Baghdad.
At least 31 people were wounded in addition to the six killed, according to the officials who spoke on condition of anonymity because they weren't authorized to release the information.
The bombing came hours after the expiration of a vehicle ban that had been imposed in the capital and several other cities on Sunday ahead of Iraq's soccer final against Saudi Arabia in the Asian Cup. Iraq won the championship, 1-0, and tens of thousands of Iraqis poured into the streets for largely peaceful celebrations as fans welcomed the victory as a show of pride and unity.