A shopper pushes a cart through a grocery store aisle in Cleveland, Texas.
Sandy Guatibonza/La Esquina TX via AP
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Sandy Guatibonza/La Esquina TX via AP
How is inflation showing up on supermarket shelves and at the gas pump? How are families coping? What are they splurging on? These were among some of the insights delivered this week about the economy.
For example, a government report on Wednesday showed us prices are climbing more slowly than they were a few months ago — but as American households know all too well, inflation is still high, with the cost of living up 3.4% from a year ago.
Here are the key takeaways about the economy we’ve gleaned this week from government and industry reports covering everything from debt to housing.
Some groceries are cheaper, but gas prices are tricky
From June to July, consumer prices rose just 0.1%, according to new federal data. Prices are still climbing, but annual inflation slowed down for the second month in a row after a sharp jump in April and May sparked by the U.S. war in Iran.
The cost of groceries actually dipped slightly between June and July, but is still up 2.7% compared to a year ago. The price of beef is still climbing, but chicken and eggs are cheaper. And lettuce prices took a dive as supermarkets offered discounts to shoppers scared by the recent cyclosporiasis outbreak.
Gasoline prices fell a bit in July, as they did in June. But they’re still up nearly 25% from a year ago, federal data shows. Average fuel prices tracked by AAA have ticked up again in recent days, given the lack of progress in getting oil tankers moving through the important Strait of Hormuz.
Inflation may be slowing – but so are wage gains
While inflation has cooled in recent months, so have workers’ pay raises. The job market is stuck in a rut, so employers aren’t having to pay as much to attract and keep workers.
Average wages rose 3.2% in the past year, according to the Labor Department’s July report. That’s slower than the growth reported for June, and also means that wages are once again not keeping pace with inflation.
This is a turnaround from the recent years, from about mid-2023 to early 2026, when wages grew faster than prices and workers’ real buying power improved.
Spending at stores and restaurants dipped in July
Retail sales declined in July for the first time in months, down 0.6% from June, according to Friday’s report from the Commerce Department. People spent a bit less on electronics, autos and auto parts, as well as gasoline thanks to gas prices dipping month-to-month.
But the big factor was Prime Day. This big sales event led by Amazon took place in June, and so spending at online stores dropped 2.2% from June to July.
Now, comparing retail sales in July to last year still shows spending grew almost across the board: People bought more clothes, sporting goods, gardening supplies; spending at restaurants and bars increased 5%. And this year’s big jump in gas prices has people spending more at gas stations, up 16% from a year ago.
There are signs that lower-income families are spending more
Researchers at the Bank of America, who analyze debit and credit card transactions, reported this week that spending by lower-income shoppers actually increased in July, while spending by upper-income folks ticked down.
That marks a slight reversal of the trendlines economists have tracked for a long while, dubbed the “K-shaped economy.” In particular, the new report found that spending at restaurants grew faster among lower-income folks than higher-income families.
Some of that spending relies on borrowing. Debt balances on credit cards and auto loans grew 1.7% in late spring-early summer compared to a year ago, according to this week’s report from the Federal Reserve Bank of New York. But other types of household debt, including student loans and mortgages, actually declined and the federal researchers say delinquency rates are “fairly stable.”
The federal government is still on a borrowing binge
Congressional forecasters said this week they expect the federal deficit to top $2 trillion this year — about $200 billion more than they were projecting six months ago.
That’s pushing the government’s cumulative debt close to $40 trillion. Just paying interest on that costs more than a trillion dollars a year, eclipsing every other federal program besides Social Security. And the interest rate the government has to pay has been climbing, which has consequences for other borrowers.
Mortgage rates typically rise and fall with 10-year Treasury yields, which hit a nearly two-decade high this week. And clearly, rising mortgage rates have been a drag on the housing market.
So after these 5 things, what’s next?
Next week, we’ll get an even more detailed look at consumer spending, thanks to a bunch of earnings reports from bellwether retailers, including Walmart, Target, Home Depot and Lowe’s.
So far, consumer giants such as Amazon and McDonald’s have continued to describe shoppers as careful, but resilient in their spending. And the next update on the cost of living from the Bureau of Labor Statistics is due Sept. 11.
