The aBP Weekly: Inflation Is Cooling, But Is the U.S. Consumer Starting to Crack?
Wall Street spent much of this week celebrating another encouraging development in the inflation story. U.S. consumer prices cooled slightly in July, helping the S&P 500 reach another record high as investors became more confident that the Federal Reserve may not need to tighten monetary policy further. But by Friday, another economic report complicated that optimistic picture.
U.S. retail sales unexpectedly fell 0.6% in July, the largest monthly decline since May 2025, raising questions about the strength of the consumer that has helped keep the U.S. economy resilient. The decline was particularly notable because economists had expected a modest increase in spending. At the same time, elevated oil prices and weaker consumer sentiment reminded investors that households are still navigating an uncomfortable combination of higher prices and slowing economic momentum. According to the U.S. Commerce Department data, July's decline followed a revised 0.2% increase in June.
